"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message news:<6WlUa.73398$0v4.4873566[at]bgtnsc04-news.ops.worldnet.att.net> ...
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Mathematically, you are more likely to be right than I am. Which
means I need to check my numbers at some point. (I think the salient
point which stuck in my head was the Boomers were twice the size of
the 1925-45 cohort).

(one thing which colours my thinking subconsciously: the European
birth rate is far below the North American: Germany and France and
Italy will have falling populations in this century)

This is
- quote -

I tend to agree. What matters though is net new household formation
at the margin. ie the number of new households buying homes. Which,
AFAIK, will blip up again in about 10 years time, as the current wave
of teenagers enters the house buying years.

The Boomers look overhoused to me relative to their needs.
Immigration will be to big cities, and I expect a continued flow of
Boomers to other places, if not to free up capital then to alter
lifestyle.

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I think a lot of early Boomers did inherit a fair bit, or are about
to, but the big increases in life span happened to those born after
1930, ie the parents of the 1955+ Boomers. My family had something
like 8 women who lived into their mid 90s (all born in the 19th
century!).

Since there are so many fewer GenXers than Boomers, they *will*
inherit, in aggregate. But as you say they will often do so in their
60s and 70s. In addition, the cost of long term care, nursing homes
etc. is such that these funds will be depleted.

The main change I see happening is people working longer. Which may
mean being a greeter in Walmart, or it may mean continuing in one's
current career perhaps in a different form.

BreadWithSpam[at]fractious.net wrote in message news:<yobhe5a1xuo.fsf[at]panix3.panix.com> ...
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Speednxs

"darkness" <darkness39[at]yahoo.com> wrote in message
news:17f41cc6.0307251429.2a391df3[at]posting.google.com...
- quote -

I'm not certain the above is true. While the Boom generation may, in fact,
be twice the size of GenX, I think that GenY is larger than GenX. I'm sorry
I can't cite a source for this, but I have read it several times. This is
the first time I have seen it reported that GenX is larger than GenY. GenY
being larger would support the projection that demand for housing will
continue to grow, albeit at a slower rate. This says nothing about
immigration, an additional growth factor.

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It has been said that we are about to watch the greatest transfer of wealth
in the history of mankind. It may be that many Boomers are expecting to
inherit their retirement funds. A conversation with one of my GenX daughters
a few years ago led me to believe this was part of her retirement plan. I
told her she ought to make a different plan, as I am likely to live in to my
nineties (family history giving a big clue) and she will be well past
retirement age before I pass anything on to her. ;-) Maybe there are a lot
of Boomers who should be having similar conversations with their parents.

Elizabeth Richardson

BreadWithSpam[at]fractious.net wrote in message news:<yobhe5a1xuo.fsf[at]panix3.panix.com> ...
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My sense is that net new household formation stays positive: in part
because of family fragmentation, despite the fall in birth rate. We
live alone, and for longer. And immigration post 1970 has once again
become a big factor in American demographics. And immigrants (first
and second generation) have more kids.

The demographic expression 'pig in the python' aptly describes the
1946-66 cohort. Hence the point about being twice the size.
Fertility has been falling in the industrialised world since at least
the 1850s, yet for one brief moment in history, it moved dramatically
upwards.

The problem is not fundamental, it is simply that as the pig passes
through the system there are big structural changes associated with
it: the boom in demand for housing in the 50s, for college places in
the 60s and 70s, the very high levels of youth unemployment in the 70s
and early 80s, and in time, the demands on the Medicare system.

What has long been speculated upon is the impact on the housing
market. This is simply the flip side of the hypothesis (common in
Japan in the 80s) that hte stock market was a one way bet because
people had to save enough for retirement.

No one expects empty houses, but the equilibrium price of houses in
areas with low population growth has not risen the way it has in, say,
California. ie the *price* of housing adjusts. Germany, for example,
has had negative house price inflation for 10 years (almost stable
demographics). Even so, some cities in Germany (Munich) have gone up.

My contention is this:

- it would be prudent to expect lower housing price inflation than was
prevalent under the most favourable imaginable demographics (ie the
Baby Boom growing up, buying houses, getting divorced, buying more
houses, etc.) of the last 30 years. It is difficult to see, at the
margin, where the net new demand is going to come from (except from
immigration).

- AFAIK, the evidence says Baby Boomers don't have much savings. yet
they are expecting to live a better standard of living than their
parents in retirement. What *is* striking is that they have a huge
amount of wealth tied up in housing. Remortgaging is one way of
accessing it, trading down is another. And the houses they live in
now, at least by the standards of their parents, are *big*.

- quote -

AFAIK, housing prices tend to track real incomes. But as various
papers cited show, they have not done so since about 1995.

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There is also a problem in many areas that voters tend to be older,
and more affluent, and therefore have fewer kids. Which sets up a
tension between immigrant communities with lots of kids, and voters.
This I think is part of what bedevils California at the moment.

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Indeed not. We need projected net new household formation.

darkness39[at]yahoo.com (darkness) wrote in message news:<17f41cc6.0307241204.12d6a564[at]posting.google.com> ...
- quote -

Census data 1900 to 1999
<http://anon.user.anonymizer.com/http...est.txtI'm looking for the big population bust where all the empty houses
just sit there…

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Speednxs

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message news:<YRRTa.70586$0v4.4714270[at]bgtnsc04-news.ops.worldnet.att.net> ...
- quote -

The Baby Boom as a cohort (ie a 20 year group) is meant to be twice as
large as the one that preceded it, and at least twice as large as the
one that followed in (Generation X) which in turn was (perhaps?)
larger than Generation Y. Birth rates have rebounded somewhat and
immigration has a large influence, but I believe (but do not know
without doing some digging) that it is likely that the generation
which will fill the Baby Boomer's homes is not as large. But there is
overall population growth.

I'm not sure the boomers will be selling when they
- quote -

I don't see anywhere else they are going to get the resources to
finance their lifestyles, unless their standard of living takes a big
drop. My understanding is that the average 401k, for example, has
less than 50,000 dollars in it.

Furthermore, financial returns in the next 15 years are very unlikely
to match those of the past 20 (the highest in recorded financial
history, I believe). So the burden is going to fall much more on
accumulated savings than on investment returns. Certainly the
aggregate statistics do not show Americans saving 10-15% of their
*gross* incomes which is likely the minimum level to sustain pre
retirement incomes post retirement.

What I expect will happen is that people will defer retirement (even
if switching careers to do so) but also look to realise housing
wealth. One way to do that is simply to move to a cheaper part of the
country (without necessarily trading down in housing size).

Demographically, the peak size of house is bought when you are, I
believe, 45. People don't trade up much after that. Whereas my
parents will probably never move (if they can avoid it) the attitudes
of my generation (I am 43) are much more flexible on such things.

However, for those who have more house than they want (or are able)
- quote -

Yes.

There isn't really, AFAIK, a word for what I was trying to describe.
Basically, Americans and Canadians of northern European descent (or
Italian or Greek, for that matter) have lower birth rates than
Americans or Canadians whose ancestors have arrived more recently (eg
Hispanic Americans).

This simply to distinguish them from 'white' (or brown?) Americans who
have arrived in the more recent waves of immigration: from central and
Latin America, from southeast asia, from the carribean islands, from
the Middle East, from Africa, etc.

It takes a generation or two for the fertility of new immigrants to
fall to the national average. And immigrants will tend to cluster
where the jobs are: ie in the big cities.

"darkness" <darkness39[at]yahoo.com> wrote in message
news:17f41cc6.0307230344.39aa7729[at]posting.google.com...
- quote -

Boy, I sure hope so and soon. When the mill in Sitka closed about 10 years
ago, the economy was eventually replaced with rich Californians wanting
summer homes away from everything but with a beautiful view. There was a
construction boom and the service economy build-up. Now, if they'd only get
busy building that bridge to the airport here in Ketchikan -- that's a 200
million plus construction job that sure would give us a boost!

Elizabeth Richardson

On 21 Jul 2003 18:30:01 GMT, BreadWithSpam[at]fractious.net wrote:

- quote -

Interesting point - if 30-year fixed rates were to rise to 8%, the
amount of monthly income needed to qualify for that mortgage jumps
substantially. In the absence of other factors, that would have a
dramatic affect on demand for higher priced homes.


-HW "Skip" Weldon
Columbia, SC

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message news:<YLbTa.66661$3o3.4445241[at]bgtnsc05-news.ops.worldnet.att.net> ...
- quote -

Yes, but when people retire they tend to trade down in location if not
housing size (that reduction in housing size may not take place until
they are 75, rather than 60) and also change location away from big
cities. (in fact, at least in the UK, the cycle has two parts.
Retire, and move somewhere relatively remote (eg Spain) and then, when
in the 70s, move back to be close to grandchildren).

Meanwhile, the emergent groups with relatively high birth rates
(immigrants, Hispanics, for example) and rising incomes buy into those
same suburbs where the Baby Boomers lived and had children. I don't
imagine a lot of the suburban dwellers of Los Angeles or greater New
York plan to retire there.

If you look at the average savings of Baby Boomers, eg the average
401k investment, then I don't think the Boomers will be able to
sustain their standards of living without tapping their housing
wealth. The Boomers are also much more geographically mobile,
arguably, than any previous group of Americans.

- quote -

AFAIK, you live in Alaska, which is probably a net beneficiary of
these trends ;-).

"HW \"Skip\" Weldon" <skip5700[at]yahoo.com> wrote in message news:<jklnhvoru7ml90rh9enignkv1pu1p8bm8a[at]4ax.com> ...
- quote -


It seems that the federal reserve tries to measure everything. Here's
a link the percentage of personal disposable income going to required
mortgage debt payments since 1980.

http://www.federalreserve.gov/releas...bt/default.htm

Since this is the national disposable income against the national
mortgage debt payments, the percentage is quite low (because lots of
people aren't home owners or have a paid-in-full house). However you
can see that the percentage has increased substantially (although one
wonders if this is due to a higher percentage of home owners).

A federal reserve survey,

http://www.federalreserve.gov/pubs/b...3/0103lead.pdf

compares debt-to-income ratios from 1992-2001 (table 14). There was
an increase in this ratio among homeowners in 1998, but in the 2001
survey this returned to 1992 levels.

"HW \"Skip\" Weldon" <skip5700[at]yahoo.com> wrote in message news:<jklnhvoru7ml90rh9enignkv1pu1p8bm8a[at]4ax.com> ...
- quote -

http://www.cepr.net/Housing_Bubble.htm

presents the bear case on the housing market, and has quite a bit of
information.

Smartmoney.com has visited this topic. If you do a search on Shiller
(or Shiller-Weiss, a consultancy which forecasts housing prices) you
may find the articles in question. They were (modestly) positive
about most markets.

The Economist about 4-5 weeks back had a special 8 page report on
Housing Prices, and is well worth checking out. They too are bears.

The way the argument runs is that yes house prices relative to incomes
have risen (this effect less pronounced in the US than in UK,
Australia, Netherlands, although some US markets (NY, Bay Area) look
particularly overstretched), but because of falling interest rates,
the carrying cost of the debt has fallen. Therefore houses are not
overpriced.

Conversely, nominal interest rates have fallen, but arguably real
interest rates (except over the very short term) have not fallen by
anything as much. So what has happened is the burden of a mortgage
has shifted from the early years (lower payments) to the later years
(the real value of the money you pay back does not fall as much,
because inflation is lower than in the 70s and 80s).

At some point, the buyer of houses is going to realise they are
actually not better off (so the argument runs) and will reduce
consumption. No sign of that as yet!

One thing to keep in mind in the US is the population is growing quite
steadily, this is almost unique amongst developed countries.
Therefore the long term structural demand for houses (in an
environment where I do not see the zoning laws getting any laxer: Not
in My Back Yard prevails) is very good, particularly around the big
urban centres where immigrants and young people tend to congregate
(LA, NY, Atlanta etc.).

Indeed, that bow wave of teenagers currently out there will, in 10
years time, be looking to buy houses (from retiring baby boomers).

All of the above said, houses are a financial asset as well as a real
asset, and it looks to me that as a financial asset they are
overvalued. But I am living in the UK, where that is very clearly the
case: the situation in many markets in the US could be quite
different.

Tad Borek wrote:

- quote -

I suspect you are right--my own experience suggests that most people
view buying a home as a significant "ego" buy--they tend to buy as much
as they can afford to swing on a monthly basis (and maybe beyond <grin> )
because the house serves somewhat to define their worth. And that has
the effect of driving up demand for a particular house when rates drop,
which raises the underlying price probably resulting in the ultimate
buyer paying about the same per month as he/she would have paid with
higher rates (and a therefore lower price for the house).

The big negative I see, therefore, is not the *refinancing* issue, but a
related one--resale prices are likely to stagnate or even go down as
rates rise. And neither solution is terribly good if you get into a
situation where you need to sell a recent acquisition and the amount you
are offered is far below what is needed to pay off the mortgage. Even
if the mortgage is nonrecourse, the problem is that the seller may have
*nothing* to show for what was invested in the house.

--
Ed Zollars, CPA
Phoenix, Arizona

Michael T Wing CPA <mtwingcpa[at]yahoo.com> writes:

- quote -

Just be careful in talking about house price versus income -
the relevant factor, economically, tends to be not house price
but size of monthly payment versus income and that monthly
payment varies with interest rates.

IIRC, folks tend to spend a {relatively} fixed proportion of
their income on mortgage/housing. With the current low rates
(and the relatively low rates of the last several years), that
has translated into higher house prices.

So house prices are going to tend to go up both in proportion
to increases in income and decreases in interest rates. As will
"house affordability".

The interest rate effect can be huge. Current rates of less
than 6% on a 30-yr fixed are pretty low, historically. Rates
went above 8% in 1973 and never fell below 8% again until
late 1992. During that 20 year period, they spent most of
their time above 10% and a goodly portion well above 12%,
hitting a high of well over 18% in late 1981. For perspective
on the effect of those rates on affordability, suppose you
have $1000 available for mortgage payments. At 12%, that
would buy you a bit less than $100,000 of house/mortgage.
At current rates - around 5.7% - that same $1000/mo buys
you over $172,000 of house.

[Mortgage rates from Freddie mac; payment calculations from
mortgage-calc.com]

So if you want to compare apples to apples, in any way at
all, when you compare the home price 40 years ago to the
home price today, you also need to compare both income and
prevailing mortgage interest rates, not just income. Then
there are also other demographics involved - real estate
in general is _very_ location specific. Some local areas
had prices go up _way_ faster than other areas.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

The Dallas Morning News had an article about this very topic. Basically it
says lenders have allowed borrowers to raise their percentage of gross
monthly income from 20 percent to between 40 - 50 percent, going to their
monthly payment. A dramatic and troubling change that forebodes problems
for many first time borroowers who took advantage of this lax lending
policy.

Go to www.dallasnews.com and search for it, in the last 30 days.



"Michael T Wing CPA" <mtwingcpa[at]yahoo.com> wrote in message
news:VA.00000a22.00301bac[at]yahoo.com...
- quote -

HW "Skip" Weldon <skip5700[at]yahoo.com> wrote:

- quote -

I don't have any stats, but I can give you an anecdotal report.

About 40 years ago my Dad changed jobs and we moved. My parents
purchased a slightly better than average "tract" home for a little
over 2 times my Dad's annual pay rate (the classic formula <g> ).

The last time that house changed hands, the price was somewhere
around 5 to 6 times MY annual income. In other words, there is no
way I could afford to buy the house (albeit now 40 years old) that
was easily affordable to my parents way back when.

I realize this doesn't prove anything, but it is an interesting
tale. <g
MTW

We've discussed this before, but I have a hypothesis that much of
today's personal finance problems originate with housing ("too much
house").

Would appreciate any web sites that discuss:

Growth in salaries/income for the past 10-15 years.

Rise in average home prices for past 10-15 years. Would
especially like to see it broken down by incomes... for example, I
suspect that the average housing price increases vary by income levels
with the greatest percentage gains in the higher levels.

Rise in other housing costs (maintenance, taxes, etc.) for the
past 10-15 years. Again, by income levels.


If I am correct, the average housing costs have grown faster than
incomes. But I can't point to stats which show this.
Any help/comments appreciated.

-HW "Skip" Weldon
Columbia, SC