As new inventory is finally starting to hit the market and demand has temporarily slowed down thanks to rising rates, the housing expansion between March 2020 and now is still very likely to go down in history as blowing unprecedented amounts of air into an unprecedented bubble.
And now we have the data to show it. Continue reading
More wealthy baby boomers are finding themselves trapped in homes that are too big to sell. They want to downsize but can’t get what they paid.
This was guaranteed to happen, and did. Baby boomers and retirees built large, elaborate dream homes only to find that few people want to buy them.
Please consider a Growing Problem in Real Estate: Too Many Too Big Houses.
Large, high-end homes across the Sunbelt are sitting on the market, enduring deep price cuts to sell.
That is a far different picture than 15 years ago, when retirees were rushing to build elaborate, five or six-bedroom houses in warm climates, fueled in part by the easy credit of the real estate boom. Many baby boomers poured millions into these spacious homes, planning to live out their golden years in houses with all the bells and whistles.
Now, many boomers are discovering that these large, high-maintenance houses no longer fit their needs as they grow older, but younger people aren’t buying them.
Tastes—and access to credit—have shifted dramatically since the early 2000s. These days, buyers of all ages eschew the large, ornate houses built in those years in favor of smaller, more-modern looking alternatives, and prefer walkable areas to living miles from retail.
The problem is especially acute in areas with large clusters of retirees. In North Carolina’s Buncombe County, which draws retirees with its mild climate and Blue Ridge Mountain scenery, there are 34 homes priced over $2 million on the market, but only 16 sold in that price range in the past year, said Marilyn Wright, an agent at Premier Sotheby’s International Realty in Asheville.
The area around Scottsdale, Ariz., also popular with wealthy retirees, had 349 homes on the market at or above $3 million as of February 1—an all-time high, according to a Walt Danley Realty report. Homes built before 2012 are selling at steep discounts—sometimes almost 50%, and many owners end up selling for less than they paid to build their homes, said Walt Danley’s Dub Dellis.
Kiawah Island, a South Carolina beach community, currently has around 225 houses for sale, which amounts to a three- or four-year supply. Of those, the larger and more expensive homes are the hardest to sell, especially if they haven’t been renovated recently, according to local real-estate agent Pam Harrington.
The problem is expected to worsen in the 2020s, as more baby boomers across the country advance into their 70s and 80s, the age group where people typically exit homeownership due to poor health or death, said Dowell Myers, co-author of a 2018 Fannie Mae report, “The Coming Exodus of Older Homeowners.” Boomers currently own 32 million homes and account for two out of five homeowners in the country.
It’s not just big houses across the Sunbelt. It’s big houses everywhere. If anything, I suspect it’s worse in the north. There is an exodus of people in high tax states like Illinois who want the hell out.
Already big homes were hard to sell. Now these progressive states are raising taxes.
Good luck with that.
For the plight of Illinoisans, please consider Illinois’ Demographic Collapse: Get Out As Soon As You Can.
When compared to a similar point in time, Millennials are deeper in debt than any other generation that has come before them. And the biggest reason why they are in so much debt may surprise you.
We’ll get to that in a minute, but first let’s talk about the giant mountain of debt that Millennials have accumulated. According to the New York Fed, the total amount of debt that Millennials are carrying has risen by a whopping 22 percent in just the last five years…
New findings from the New York Federal Reserve reveal that millennials have now racked up over US$1 trillion of debt.
This troubling amount of debt, an increase of over 22% in just five years, is more than any other generation in history. This situation may leave you wondering how millennials ended up in such a sorry state.
Many young adults are absolutely drowning in debt, but the composition of that debt is quite different when compared to previous generations at a similar point in time.
Mortgage debt and credit card debt levels are far lower for Millennials, but the level of student loan debt is far, far higher…
While the debt levels accumulated by millennials eclipse those of the previous generation, Generation X, at a similar point in time, the complexion of the debt is very different.
According to a 2018 report from the St. Louis Federal Reserve Bank, mortgage debt is about 15% lower for millennials and credit card debt among millennials was about two-thirds that of Gen X.
However, student loan debt was over 300% greater.
Over the last 10 years, the total amount of student loan debt in the United States has more than doubled.
It is an absolutely enormous financial problem, and there doesn’t seem to be an easy solution. Some politicians on the left are pledging to make college education “free” in the United States, but they never seem to explain who is going to pay for that.
But what everyone can agree on is that student loan debt levels are wildly out of control. The following statistics come from Forbes…
The latest student loan debt statistics for 2019 show how serious the student loan debt crisis has become for borrowers across all demographics and age groups. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. Borrowers in the Class of 2017, on average, owe $28,650, according to the Institute for College Access and Success.
What makes all of this even more depressing is the fact that the quality of “higher education” in the U.S. has gone down the toilet in recent years. For much more on this, please see my recent article entitled “50 Actual College Course Titles That Prove That America’s Universities Are Training Our College Students To Be Socialists”.
Our colleges and universities are not adequately preparing our young people for their future careers, but they are burdening them with gigantic financial obligations that will haunt many of them for decades to come.
We have a deeply broken system, and we desperately need a complete and total overhaul of our system of higher education.
Due to the fact that so many of them are swamped by student loan debt, the homeownership rate for Millennials is much, much lower than the homeownership rate for the generations that immediately preceded them. The following comes from CNBC…
The homeownership rate for those under 35 was just 36.5 percent in the last quarter of 2018, compared with 61 percent for those aged 35 to 44, and 70 percent for those aged 45 to 54, according to the U.S. Census. The millennial homeownership rate actually dropped in the fourth quarter compared with the third quarter, but was unchanged year over year.
This is one of the big reasons why “Housing Bubble 2” is beginning to burst. There are not enough Millennials buying homes, and it looks like things could be even worse for Generation Z.
If you are a young adult, I would encourage you to limit your exposure to student loan debt as much as possible, because the debt that you accumulate while in school can have very serious long-term implications that you may not even be considering right now.
As The Federal Reserve continues to unwind its balance sheet, pending home sales YoY declined 9.5% YoY, the worst since 2014.\
Pending home sales got a big boost from The Fed’s third round of asset purchases (QE3), but PHS are feeling the pain of The Fed’s unwind.
Following Case-Shiller’s report that home price gains are the weakest in four years, Pulte Homes’ CEO admission that 2019 will be a “challenging year,” and existing home sales carnage, Pending Home Sales were expected to very modestly rebound in December.
But they didn’t!
Pending home sales dropped 2.2% MoM (versus a 0.5% expected rise) to the lowest since 2014…
This is the 12th month in a row of annual sales declines… and the biggest annual drop in 5 years…
Yet another sign the housing market is struggling amid elevated property prices and borrowing costs – but there’s always hope…
“The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” NAR Chief Economist Lawrence Yun said in a statement.
But with mortgage rates declining recently and the Fed less likely to raise borrowing costs, “the forecast for home transactions has greatly improved.”
Finally, the Realtors group forecasts a decline in annual home sales to 5.25 million this year from 5.34 million in 2018, which would mark the first back-to-back drops since the last recession.
Millennials in New York are known for living in a state of perpetual brokeness – between student loans, $20 nightclub drinks and $15 avocado toast, it’s easy to understand why 70% of millennials have less than $1,000 in savings.
Now we can add expensive, glorified closets to the mix, as the Wall Street Journal reports.
30-year-old marketing manager Scott Levine lives in an $1,800 per month, 98-square-foot room in a postage-stamp of an apartment – “basically, a kitchen” – with two roomates. Every week, someone from Ollie – his property manager, stops by to drop off towels and toiletries.
A “community-engagement team” at Ollie helps plan Mr. Levine’s social calendar. A live-in “community manager”—sort of like a residential adviser for a college dorm—gets to know Mr. Levine and everyone else living on the 14 Ollie-managed floors of the Alta LIC building, known as Alta+, and finds creative ways to get them engaged in shared activities, like behind-the-scenes tours of Broadway shows or trips to organic farms. –WSJ
“Life in general can be a bit of a headache,” says Mr. Levine. Thanks to Ollie, he adds, “Everything is done for you, which is convenient.”
Ollie’s business model is all about convenience and roommates – usually single people in their 20s and 30s who have all amenities provided for them, while sharing a kitchen and common area.
For city-dwellers accustomed to living cheek-by-jowl with people whose names they’ll never bother to learn, this might seem strange. But for young people still forming their postcollege friend groups—in an era when participation in civic life is down and going to a bar can mean huddling in a corner swiping on Tinder—it makes sense. So much sense that people put up with apartments so small they’re called “micro.” But hey, free shampoo. –WSJ
Meanwhile, startups such as Ollie and Common are competing with big-city real-estate developers. Common manages 20 co-living properties in six cities where roommate situations are more common, such as New York, Los Angeles and Washington DC. They have approximately 650 renters according to CEO Brad Hargreaves.
“Our audience is people who make $40,000 to $80,000 a year, who we believe are underserved in most markets today,” Mr. Hargreaves says.
Other startups are managing existing homes and apartments, “Airbnb-style” as the WSJ puts it.
Bungalow, which just announced $64 million in funding, wants property owners to offer space to “early-career professionals” looking for a low-maintenance place to stay. It charges rent that’s “slightly higher” than what it pays those owners, a company spokeswoman says. It currently maintains over 200 properties—housing nearly 800 residents—across seven big cities, says co-founder and CEO Andrew Collins.
As with Common and Ollie, Bungalow advertises that it furnishes the common areas in its homes, installs fast free Wi-Fi, and cleans them regularly. The company also organizes events and outings to help you “build a community with… your new friends.” –WSJ
One of the underlying aspects of the co-living startup models is a technology platform that both advertises to prospective tenants and takes care of their needs once they’re living on-site. Ollie’s “Bedvetter” system, for example, shows apartments to potential tenants – and shows who’s already signed up to live there with links to their personal profiles in order to match roommates. Bedvetter also matches people into “pods” of “potential roommates” before they begin an apartment hunt.
“It’s like online dating,” says Levine – while his roommate, Joseph Watson, 29, compares it to eHarmony or Match.com vs. Tinder, as it’s designed for long term pairings.
“Micro Economics”
While millennials in New York and other urban areas scramble to make ends meet, developers are making hand over fist on the co-living movement – even though the renters themselves are paying less than they would for a private studio.
The Alta LIC building also has conventional apartments, but the co-living units are filling up faster, says Matthew Baron, one of the Alta LIC building’s developers. What’s more, he adds, he can get more than $80 a square foot for Ollie units compared with around $60 a square foot for the others, even though the Ollie ones are on the lower, less-desirable floors. –WSJ
Another complication with co-living arrangements is tricky community management. L.A.’s PodShare, for example, vets potential tenants beforehand – however issues with problem tenants are unavoidable. “We’ve hosted 25,000 people at this point, so there’s bound to be some problems,” says founder Elvina Beck.
Common building tenant Teiko Yakobson said that the “community vibe broke down after Common eliminated the paid “house leader,” complaining that “We all just became strangers, and it was no better than living in any other apartment.” Common instead replaced the program with “centralized” community managers at the corporate level – which Hargreaves says is “more coherent” for them.
It’s not all bad, however…
When it does work, co-living can re-create the kind of communities tenants seek online—ones grounded in common interests and shared socioeconomic status.
Mr. Levine, who not only lives in a co-living building but also works in a co-working space—and in whose social circle most people do either one of those or the other—is aware that, while this isn’t for everyone, he is hardly a standout. “One thing I’ve heard before is that I’m a stereotype of a New York millennial,” he says.
Just make sure you have earplugs in case your roommate is able to get laid in their respectively expensive, tiny room.
There is a serious economic crisis brewing that few seem to be paying attention. According to a new survey from Zillow Group Inc. (ZG – Get Report), approximately 22.5% of millennials ages 24 through 36 are living at home with their moms or both parents, up nine percentage points since 2005 which was 13.5% and the most in any year in the last decade. Between the student loans which cannot be discharged thanks to the Clintons (to get the support of bankers) even after they find that degrees are worthless when 60% of graduates cannot find employment with such a degree and the fact that taxes have escalated to nearly doubling over the last 20 years that is predominantly state and local, the affordability of buying a home has been fading fast. Despite the fact that millennials are eager to enter the real estate market, they’re bearing the brunt of the challenge directly caused by the combination of taxes and non-dischargeable student loans.
Now 63% of millennials under the age of 29 cannot even afford the cost of home ownership, according to a CoreLogic and RTi Research study. The expense, in fact, is their number one reason for remaining a renter. In their research, they concluded that one-third of millennial renters reported feeling they cannot afford a down payment to buy a home. This is a sad response that is not being taken into consideration by governments.
Where home prices have not risen sharply, taxes have. First-time home buyers face ever-growing challenges to find and buy affordable entry-level homes as the economics of inefficient governments at the state and local levels have refused to reform and raise taxes to meet pension costs they promised themselves. Politicians from London to Vancouver have increased taxes to try to bring home prices down rather than looking at the problem objectively. All they are accomplishing is punishing people who have owned homes and destroying their future when home values were their retirement savings.
California and Illinois are just two major examples at the top of the list of grossly mismanaged state governments. It is this net affordability factor that has begun to encumber sales of real estate, softening prices and turning many millennials into renters rather than home buyers. Then add the rise of interest rates and we have an economic cocktail of taxes that is beginning to kill the real estate market in a slow death drip by drip. Depressions take place when the debt and real estate markets collapse – not equities and commodities. The amount of money invested in debt markets dwarfs equities, It is ALWAYS the debt market that you undermine when you want to destroy an economy.
Taxes and the rise in interest rates will further erode affordability and is beginning to slow existing-home sales in many markets already. As this trend continues, home prices and mortgage rates over the next couple of years will likely dampen sales and home price growth. There was another study conducted by Freddie Mac which also found that affordability challenges are contributing to a downtrend in young adult home ownership. Long-term, real estate prices will decline as taxes and interest rates rise. The next crop of buyers is being culled and as that unfolds, real estate cannot rise when banks also begin to curtail the availability of mortgages.
Failing to save for retirement tends to be the biggest financial regret among Americans but millennials still want it all, they want it quickly, and without much sacrifice, data from a recent Bankrate.com study suggests.
Perhaps unsurprising given the older generation’s general stereotyping of millennials as having less ambition and work ethic combined with an immediate gratification self-pitying me-first perspective on life, the survey finds that Americans ranging in age between 18 to 37 say that while they don’t have much savings, they still want to retire early. Well perhaps there’s ambition of a sorts, but ambition without the work and preparation.
Of those millennials already saving, the median retirement account balance is about $19,100. But overall, roughly two-thirds of millennials have nothing saved so far — concludes a National Institute on Retirement Security report (NIRS).
The data shows that “younger Americans are hoping to retire in their early 60s, according to Bankrate’s survey. For millennials, 61 is the ideal retirement age.”
This is especially surprising given that as we’ve discussed time and time again, America’s millennial generation is burdened by debt, effectively precluded from home ownership and increasingly disgruntled and pessimistic about their future prospects for wealth and happiness. But perhaps they are also a bit delusional or at least less than realistic at times, especially on the topic of personal finances and the future.
Add to this that it’s no secret that people are living longer and many are staying in the workforce long past the traditional retirement age of 65, but it appears there’s a vast disconnect between millennials’ goals and their preparations to reach those goals.
Though stating that obviously “early retirement is something that seems very appealing,” the Bankrate study analysts conclude:
If only wishing made it so. Of those millennials already saving, the median retirement account balance is about $19,100. But overall, roughly two-thirds of millennials have nothing saved so far, according to a February report by the National Institute on Retirement Security.
And a bit more modest, the study further finds “half of baby boomers think it’s best to retire at age 65 or older. Nearly 1 in 5 (17 percent) Americans ages 73 and older say you should wait until you’re at least 70 to retire.”
Among the data used by Bankrate is from the National Institute on Retirement Security (NIRS), which recently found that about 66 percent of people between the ages of 21 and 32 have yet to save a single dollar toward their retirement fund, based analyzing Census data collected in 2014.
Researchers for NIRS cite the “harsh economic landscape” millennials encountered when they first entered the workforce, especially the years between 2008 and 2012.
“Reality begins to set in as you advance toward retirement age,” observes Bankrate’s chief financial analyst, Greg McBride, who concludes, “I think that’s why you see those in the Silent Generation having the highest age estimate and the boomers being the next highest. A lot of those Gen Xers and millennials that say 60 or 61 today, they may put a different number on that and in another 20 years.”
Overinflated college tuition facilitated by a bottomless ocean of cheap student loans has so far trapped forty-five million Americans with a record $1.48 trillion in non-dischargeable debt – an amount which has more than doubled since the 2009 lows.
As we reported in January, approximately 40 percent of student loans taken out in 2014 are projected to default by 2023 according to the Brookings Institute.
However, a new game show on TruTV offers millennial contestants a chance to answer trivia questions – and if they win, the game show will pay off their student debt.
“Paid Off,” a new trivia game show that premiered this week tries to illuminate the student debt crisis that has entrapped countless millennials. To get the balance right, the show’s producers partnered with a nonprofit group called Student Debt Crisis.
Its executive director and founder, Natalia Abrams, gave this advice to producers: “Every step of the way, from signing up for college to paying back their loans, it’s been a confusing process. So make sure that there’s some heart to this show.”
Video: Paid Off with Michael Torpey Season 1 Trailer
Michael Torpey, a New York-based actor (“Orange is the New Black”) who is the host of the show, acknowledges that student debt is a crisis and one of the most difficult financial issues plaguing millennials in the gig economy.
“We’re playing in a weird space of dark comedy,” said Torpey, who developed the show with TruTV producers and various nonprofit groups. “As a comedian, I think a common approach to a serious topic is to try to laugh at it first.”
Video: Paid Off with Michael Torpey – The Story Behind Paid Off with Michael
The rules of game show are simple: Three millennial contestants, all of whom have an exorbitant amount of student debt, go head-to-head in a few rounds of trivia questions, hoping that their useless liberal arts degree enables them to answer enough questions right. If they win, well, the show will cover 100 percent of their outstanding student loans.
“One of the mantras is ‘an absurd show to match an absurd crisis,’” Torpey told The Washington Post. “A game show feels really apt because this is the state of things right now.”
Earlier this year, the show had a casting call in Atlanta – this is what the casting flyer stated: “truTV’s new comedy games show PAID OFF is going to do something the government won’t – help people get out of student loan debt! If you’re smart, funny, live in the Atlanta area and have student loan debt, We Want You!”
Video: Paid Off with Michael Torpey – Finger The Masters
Torpey told NBC that “he strives to balance the light hearted trappings of a game show with an earnest, empathetic look at the student debt issue.”
“I want to be very respectful of the folks who come on our show, who opened their hearts and shared their struggles with us,” Torpey said. “I hope this show de-stigmatizes debt. I mean, there are 45 million borrowers out there. It is a huge number of people!”
Google searches for “paid off game show” have been rising since June.
Meanwhile, “student loans forgiveness” searches have been surging over the cycle.
Millennials, the largest and most significant generation for the US labor market, came of age in the era of broken central bank policies, leading to the greatest wealth, income and inequality gap in recent history. While baby boomers promised millennials the world through (expensive) college degrees, this generation discovered that massive student loans coupled with a deteriorating work environment had turned them into permanent debt and rent slaves.
And now, according to a new Axios/Survey Monkey poll, millennials are getting angry, and starting to point fingers and cast blame, with a majority accusing baby boomers of not just making things difficult for them, but, of “ruining their lives.”
The survey found 51% of millennials (18 to 34-year-olds) blame baby boomers (51 to 69-year-olds) for making a raft of poor decisions since the 1980s, that have contributed to a weak political and economic environment; only 13% said the boomers made things better. Gen Xers was not satisfied with the pesky boomers, either; as 42% of them have blamed their life’s troubles on the boomers. Most amusingly, upon self-reflection, 30% of boomers agreed that their generation’s policies had made things worse, while only 32% said they had made it better, and 34% answered it made no difference.
When asked on how to improve today’s economic and political environment, millennials had several modest proposals:
While the economy has entered its late-cycle phase, the dangerous rift is growing between the millennials and boomers, each wrestling for a smaller pool of jobs and shrinking government handouts. The inter-generational conflict will only escalate due to the historic accumulation of debt, and unprecedented shifts in demographics and automation, which will only accelerate into the 2020s.
But the punchline is that if Millennials loathe Boomers now when the economy is still doing relatively well thanks to a decade of central planning and trillions in liquidity, one can only imagine how delighted they will be when the next recession, or rather depression, hits.
Easy Money 