A Socio economic discussion about boomers.

Morgan3820

Morgan3820

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A Socio economic discussion about boomers.
Disclaimer I’m a boomer. But a late one. So right now, boomers are buying stuff and spending money. The southeast and southwest of seeing a flood of baby boomers buying houses, buying boats, buying airplanes. The oldest of the boomers are pushing 80. As time goes by they will not be able to fly those airplanes, run the boats, and will need to move into assisted living or get buried. Currently, my wife and I are helping my pre-boomer father and mother-in-law transition into an assisted living situation.
It made me wonder about how things might unfold in the next 10 to 15 years as the largest generation in history gets to their twilight years. My 24 yr. old daughter is concerned that when she finishes her school and military obligation that she won’t be able to afford a house. I can understand her point of you when in the Raleigh area vinyl boxes in a bean field are going for north of $400,000. But my advice to her was not to worry as a lot of these retired boomers are going to be selling, putting a deflationary pressure on the price of housing. And that being a physician she will always be in the top tier of wage earners.
So what do you all think?
 
a whole generation has been spoiled.

Years and years and years ago, owning a house was not something everyone expected to do... ever... (never mind being able to buy one just after graduating).
 
I'm a late Boomer myself, and I don't think your assessment is far off. Right now the senior living industry is expanding, and will probably continue to do so for another 20 years or more. After that I wouldn't bet on its continued robust health. I don't know that boomers buying houses has much to do with housing prices and shortages, real or perceived; I think they mostly bought years ago in the 80s and 90s. There was a sharp drop in home building for several years beginning in 2009, from which we still haven't really recovered. We're just now getting back to building levels from the 1990s, but we've added 50 million people to the population of the country in the last 20 years. Add to that the ridiculously low interest rates we saw for nearly ten years, which resulted in many people buying houses who otherwise wouldn't have. Those two things have combined to drive prices up significantly. Low supply caused by reduced production and growing population, high demand caused by low interest rates.

I suspect the number of single family houses on the market is going to stay somewhat artificially depressed for a while, too. The extremely low interest rates also resulted in a lot of houses being bought by investors (myself included) for rental use, and for the most part those won't be sold any time soon. In fact, I think that will probably eventually result in a mini flood of homes being sold in several years as the aging owners decide to divest before they croak. I don't really want my kids to have to manage or sell rental properties.

Also bear in mind that the post-Boomers are largely unfamiliar with the concept of paying serious interest on mortgages. The mortgage on our first house (1985-ish) was 13.5%, which was a bargain at the time. When we moved a few years later we thought we were in heaven when we got 10.75%. My son has decided they can't even think about buying their next step up with mortgage rates as high as they are -- good heavens, rates are over seven percent! Gasp. I think he's paying about 4% now, which I think is less than my checking account paid when I was his age.
 
Yeah, Id say two generations of young home/auto buyers have been spoiled by almost free money. I remember my first car loan out of college being 6.5%, amd that was one of the better rates. Reality bites.

And yes, there will probably be a glut of homes/toys as the boomers shuffle off. By the numbers im a tail end boomer, but identity more with gen x.
 
There won't be a glut of housing due to boomers. The following generations are plenty big enough to need it all. Though things could get interesting by the time gen X starts dying in bulk, because the Gen Alpha numbers are lower and likely to stay that way due to the difficulty in getting the Jeff Bezo's of the world to pay a living wage, so fewer and fewer can afford as many kids as they would otherwise like to have in their family.

Related: I read the other day that if construction numbers remain as they are, it will take a bit over a decade to build enough homes that supply is meeting demand.


1701614635816.png
 
I'm on the front side of the baby boom. I think the analysis isn't too far off, but I also agree with @172andyou that there are ameliorating factors. The other thing is, apparently baby boomers are staying in their largely paid-for houses, at a higher rate than predicted, rather than moving into senior living, so the possible housing glut may never happen. More houses will come on the market, but not en masse. My parents moved into senior living about 17 years ago and it was so hard to get in to places that they signed the contract before the place was even built. Now there are actually vacancies, as my husband and I just learned when we were looking for a place for his brother.

The size of the younger generation is cause for concern because so many schools (K-16) were built to accommodate the baby boomers. Since funding is dependent on enrollment, there is going to be a lot of fighting to keep kids in public schools (just when private schools and home-schooling seem more attractive to a lot of people), and universities are going to be competing hard for students. I suspect a lot of schools and universities will end up closing.
 
I tend to think that prices will be somewhat "sticky", because people hate selling something for less than they perceive it is worth. As wealth is passed down to the successive generation, people who thought they could never "own" a home will just end up owning the inherited property. Ultimately one of the biggest problems though is that there are going to be fewer and fewer people to provide services at low prices. As a result, I anticipate that houses and asset prices will largely remain static as that transition begins, but labor costs will increase to the point where they reflect more of the past ratio of labor to housing costs. So brush up on your home repair skills etc, because they will get more and more expensive. Your plane annual will begin to represent a more and greater percentage of the total capital cost of the plane to begin with.
 
wilkersk said:
I'll throw this out there. Read this and see what you think: https://a.co/d/8fPIOj7
Click to expand...
I have listened to him quite a bit on YouTube. While I view his data and conclusions are compelling, I’m also not sure he’s all that he is viewing the whole picture either. But he does feel that the North America region is in a relatively good position going forward.
 
gov98 said:
I tend to think that prices will be somewhat "sticky", because people hate selling something for less than they perceive it is worth. As wealth is passed down to the successive generation, people who thought they could never "own" a home will just end up owning the inherited property
Click to expand...
Chortle. Let me know about that wealth pass down. I'm 64 and my father is still alive at 87. Not sure I'm going to see much pass down, certainly haven't seen it yet.
 
Is there a secondary boom from boomers having children, or have they had fewer children than normal?
 
SixPapaCharlie said:
I think all of those boomers' houses are going to be purchased by corporations and rented out to the next generation
Click to expand...
That's already happening. Some famous guy started doing it many years ago. Bezos, Musk, I don't remember but one of those types
www.cnbc.com

Wall Street has purchased hundreds of thousands of single-family homes since the Great Recession. Here's what that means for rental prices

Corporations backed by private equity groups such as Blackstone and Pretium Partners bought tens of thousands of homes across the U.S. Sun Belt.
www.cnbc.com www.cnbc.com
 
Who is the guy that said in the future you won't own anything and you'll like it? I think that's probably going to be true.

I bet my grandkids won't even own a car. They'll pay a monthly subscription for a service where an automated vehicle picks them up takes them to work and then goes on to the next rental property
 
My view, my opinion, my whatever you want to call it. Part of what's happening is that consumers are no longer being sold goods or services. We're sold credit. No one buys a car any more. They "finance" it. (Then they finance their next car and roll in negative equity.) The lenders bring in more money than the cars.

This is just as true (if not more so) in real estate. People just getting out of college look at the house their parents own and decide that nothing less will suffice, ignoring the fact that those parents bought that house five or ten years into their careers, not seconds in. Furthermore, with the prevalence of loans, these graduates buy more house than they can afford, this creates a false demand. The smaller (and cheaper) houses aren't built because everyone's leveraging through their ears to buy bigger homes. Whether they can make the payments two years down the line... well?

Sometimes, it's not even the house that's bigger, but the house is in an HOA with a pool, a soccer field, or other "amenities" driving the cost up. There are still options, but you have to be creative (@SkyChaser and I are shopping. On an unrelated (meaning very related) note, is anyone interested in buying a rental property in south GA?).
 
2-Bit Speed said:
Sometimes, it's not even the house that's bigger, but the house is in an HOA with a pool, a soccer field, or other "amenities" driving the cost up. There are still options, but you have to be creative.
Click to expand...
Brick ranchers like my grandparents had are getting rare, even in the suburbs. The "modest" federal architecture homes in the city are being gutted and rebuilt into fortresses at twice the price. Dat alpha.

The game is the game, and it can't be played without artificial scarcity, manufactured demand, and asymmetric information.
 
Bob Noel said:
a whole generation has been spoiled.

Years and years and years ago, owning a house was not something everyone expected to do... ever... (never mind being able to buy one just after graduating).
Click to expand...

51% of Baby Boomers were homeowners at 30, compared with 48% of Gen Xers and 42% of Millenials. Boomers have lived under the most favorable economic conditions in history, yet the other generations are the spoiled ones?
 
Morgan3820 said:
…But he does feel that the North America region is in a relatively good position going forward.
Click to expand...
That’s kinda the point though. “Relatively”! I suspect general aviation (as well as some other fun things this late-boomer likes to do are going to get tougher to do(or already are) than can be justified. The extreme polarity of current social moods is not helping IMHO.
 
DavidWhite said:
51% of Baby Boomers were homeowners at 30, compared with 48% of Gen Xers and 42% of Millenials. Boomers have lived under the most favorable economic conditions in history, yet the other generations are the spoiled ones?
Click to expand...
And with that, I’ll just say, ‘peace out!’

-“spoiled” boomer
 
DavidWhite said:
51% of Baby Boomers were homeowners at 30, compared with 48% of Gen Xers and 42% of Millenials. Boomers have lived under the most favorable economic conditions in history, yet the other generations are the spoiled ones?
Click to expand...

I would love to know the numbers of Millenials who would be happy with living in a 3 bedroom, 1 bathroom house with one basic car, one tv, a landline, going out to eat once or twice a month, and a roadtripping vacation once every couple of years.

I would be the last person to say that the economy is wonderful for us later generations, but it's more than just a bad economy. Lifestyle standards have gone through the roof. What was considered a good life is now considered borderline improvished by many, or least as "just ekeing by".
 
Even the "base model" car now has power steering, power windows, A/C, Radio, and cruise control.
 
SkyChaser said:
I would love to know the numbers of Millenials who would be happy with living in a 3 bedroom, 1 bathroom house with one basic car, one tv, a landline, going out to eat once or twice a month, and a roadtripping vacation once every couple of years.

I would be the last person to say that the economy is wonderful for us later generations, but it's more than just a bad economy. Lifestyle standards have gone through the roof. What was considered a good life is now considered borderline improvished by many, or least as "just ekeing by".
Click to expand...

All good points, however I think that cell phones are so ingrained into life these days that I would say it's almost a requirement to have one. I know I certainly couldn't do my job without one.
 
SixPapaCharlie said:
I think all of those boomers' houses are going to be purchased by corporations and rented out to the next generation
Click to expand...

We didn't like that idea, so we added a "no rentals" clause to our covenants. There is one rental house in our neigborhood, once it gets sold, that's all over.
 
DavidWhite said:

It's an old article, but it hits all the high notes.
Click to expand...

Some interesting points, but it makes it sound like there's only so much wealth that gets distributed. That's a suspect viewpoint. Wealth is created; it doesn't fall from the sky like rain, with droughts on one generation and floods on another.

To me, the more interesting discussion would be why boomers seem to hold more wealth. Did they create more? Did they spend less? Invest better? Make different/better job choices? Are boomers more savvy about money management than millennials? There are dozens of possible reasons, but that's what should be explored. It's not enough to just point out a disparity.

One interesting consideration is that millennials are much more likely to hold a college degree than boomers. But what fields did they study? How many of those majored in Mayan architecture or 14th century poetry? I really don't know, but some studies have shown that millennials took longer to land good jobs than boomers did. This might be indicative of a difference in job availability, and it might indicate a difference in job skills.

I'll also note that college costs skyrocketed, putting those educated millennials much deeper in debt than boomer graduates. That impact shouldn't be underestimated. Debt is an incredible drag. Getting ahead while deeply in debt is like trying to swim with a brick in each hand.

Oh, and just for reference, I'm a late-model boomer and an early retiree.
 
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SkyChaser said:
I would be the last person to say that the economy is wonderful for us later generations, but it's more than just a bad economy.
Click to expand...

The economy waxes and wanes. That's life. The economy is not as bad now as during the Carter administration, and nowhere near as bad as during the depression. Every generation will go through good times and bad. Some come through okay and some don't. Wisdom in handling money will make it more likely you'll weather the storms, though there are no guarantees.

You and @2-Bit Speed seem to handle things well and not get in over your heads, and you're making sensible plans. You're going to be well ahead of the game. Just stay the course.
 
Another interesting point is that millennials seem to start catching up.

Despite all this, older millennials in general have been able to make up much of the lost ground compared to boomers — at least in terms of earnings.​
​
By the age of 35, older millennials were actually more likely to hold a “good job” than boomers of the same age. That’s largely thanks to the earnings boost from their degrees.​
money.com

Research Confirms It's Harder for Millennials to Get a 'Good' Job Than It Was for Boomers

Most boomers got their first good jobs at a younger age, with less education.
money.com money.com

Time will tell.
 
Bill said:
Seems reasonable to me. Someone who has been in the workforce 15-30 years more than another group should, all things equal, have more assets. Time value of investments and all that.
Click to expand...

Yes, and those who have been retired from the workforce for a while are depleting the assets they accumulated while working. Those who have worked the longest and are on the cusp of retirement will have peak assets.
 
Half Fast said:
Some interesting points, but it makes it sound like there's only so much wealth that gets distributed. That's a suspect viewpoint. Wealth is created; it doesn't fall from the sky like rain, with droughts on one generation and floods on another.

To me, the more interesting discussion would be why boomers seem to hold more wealth. Did they create more? Did they spend less? Invest better? Make different/better job choices? Are boomers more savvy about money management than millennials? There are dozens of possible reasons, but that's what should be explored. It's not enough to just point out a disparity.

One interesting consideration is that millennials are much more likely to hold a college degree than boomers. But what fields did they study? How many of those majored in Mayan architecture or 14 century poetry? I really don't know, but some studies have shown that millennials took longer to land good jobs than boomers did. This might be indicative of a difference in job availability, and it might indicate a difference in job skills.

I'll also note that college costs skyrocketed, putting those educated millennials much deeper in debt than boomer graduates. That impact shouldn't be underestimated. Debt is an incredible drag. Getting ahead while deeply in debt is like trying to swim with a brick in each hand.

Oh, and just for reference, I'm a late-model boomer and an early retiree.
Click to expand...

More comes down to opportunity than anything else. The "greatest generation" set the pattern in the 70s when they were in political power. Borrow money, which is future consumption spent today. A few key points that have driven the debt that drags on Gen X and later.
1. In the 60s, companies went with defined benefit programs. Effectively many of these programs placed huge economic burdens on the companies, but left out huge swaths of the population once people retired. This led to the growth of Medicare.
2. In the 70s, banks recognized that people had a lot of equity in their homes. They started to push/sell HELOCs hard. This was a new way for consumers to leverage their assets to spend more money now.
3. In the 80s, the federal government got in the game. President Reagan and Speaker Tip O'Neil made a deal to solve the short term debt problems but did not address the structural problems that entitlements represented. If you web search you will find the trustee reports predicting the predicament we are in now.
4. In the 90s, the boomers really came to power. They had learned from their parents generation to kick the can down the road. To fund the entitlements, money needed to come from somewhere. Well, young people do not vote. So, the portion of the school costs for college/university/trade school started to decline while costs were rising.
5. In the 2000s, medical costs continued to be a major drive of cost issues at college/university/trade schools; since by its very nature this is a labor intensive effort. Boomers effectively blocked any attempt to actually reign in medical costs, and forced society to attempt to stay on a defined benefit program for retirees.
6. In the 2010s, the situation stayed the same. We just kept getting deeper in the hole.
7. Now in the 2020s, we are effectively broke, and the future generations are largely screwed.

The point being, as others have said, debt is a drag, and having debt prevents society from presenting opportunities to future generations. And as a generation, boomers learned from their parents on how to screw the future generations, and did an even better job of it.

So, while all this was going on. A few other critical factors were happening to make people feel good, but actually hurt the society:
1. Globalization was occurring. Companies began to chase the lowest cost labor markets. This sucked employment away from the USA; but made lots of material stuff cheap.
2. As part of globalization, the US went from an export driven economy to one powered by consumerism.
3. The pace of technical innovation was increasing. This was raising the required skills for an increasing percentage of the jobs still locally available.
4. One of the results of #3 is more education is required, at the same time social support and spending for additional education was declining. The result, a larger and larger share of the cost of education was moved from the public purse to the individual.
5. WallStreet shifted the focus of many companies away from long term strategies toward the next quarter. The result, is companies have little to no incentive to invest in employees, or loyalty to the employee. So companies no longer want to hire the entry level position and grow/invest in the employee. They want to hire someone already experienced and can hit the ground running.

Those are the ones I am aware of. I am sure there is more. The point is, it is not any one thing, it is the sum total of many factors. Each of which has largely destroyed the ability of future generations to create wealth.

Tim
 
2-Bit Speed said:
Even the "base model" car now has power steering, power windows, A/C, Radio, and cruise control.
Click to expand...

My Dad was 42 before he thought he was well off enough to splurge on a car that had power windows, A/C, and holy cow, an FM radio (all cars before that had AM radios). We pleaded with him order the AM/FM/cassette stereo on that car, but he said nope, too much money. And besides, he said, who pays for music when it's free on the radio?

That's the mindset of an early boomer, very conservative with what they spent.
 
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