Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

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rhornback
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Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by rhornback » Tue Jun 12, 2018 8:15 pm

I wanted to share this article which I found very interesting. The article has a few thoughts but the ones I got from it are:

1. Lots of baby boomer expect equity for their homes as part of their retirement savings plans
2. Millennials cannot afford and do not necessarily want these homes

I relate better to the circumstances around me. I live in the suburbs of Chicago. Of course there are those who live in Southern California, Portland, Seattle and other areas of hot real estate markets which will be different.

Where I live I think it is an accurate statement that many boomers are expecting a positive return on investment for their houses. And I suspect because as a nation we do not save very well, that many boomers have a lot of capital tied up on their homes achieved by paying off their houses over the last 30 years.

Where I live there are so called estate homes. Homes with big yards with well and septic systems. IMO many of the owners of these estate homes tried to mimic the country estates of old wealth which are seen on TV. But I feel the world has moved on. Personally a well and septic system does not appeal to me and I do not want a lawn so large that I need to hire a service to cut and maintain it.

The other part of this mix are houses in the villages. Many of these homes started small but have been extensively expanded and remodeled. These are narrow lots but very deep. When you look at the houses they look small from the front but many of them have been extended backwards quite a bit where the backyards used to be.

Homes where I live around 500K seems to sell OK. Homes over 500K do not seem to take longer to sell. I assume this is partially because conventional loans end around $450K and the other reason is this is there is a limit to which young couples can afford.

The problem is many of the owners of 'estate' homes and extensively remolded homes have spent a lot on their homes and they may be worth less than they invested into them.

There seems to be a shadow inventory of houses where I live, where people would like to sell their houses but not at current market rates. In other words, they would sell their homes for 750K but not for 500k or 600K.

I believe this problem is exasperated by a trend of corporations to move into the city. Where I live a commute into the city at best 1.5 hours each way. This includes driving to the train station, parking, taking the train, walking or taking a bus to the office. Many millennials IMO find this distasteful. Frankly, I myself would not be trilled to have to work in the city.

Where does this end? I am unsure. If inflation goes up enough ultimately these houses will be sold for $750-1 million. But that would be inflation adjusted money. The real buying power would be diluted. The alternative is ultimately the baby boomers will get sick enough, old enough, or pass on and the homes will be sold at market rate through the estate.

In the mean time the tax obligations given to homeowners in Illinois keep going up. You could make the argument that it would make more financial sense to take a loss on your house and move to a smaller house in an area with lower taxes than it would to keep your big house with the expectation of a return in the future. The reason is the high yearly cost of maintenance, insurance, and real estate taxes.

But that does not solve the problem of expecting a certain amount of capital from your home sale to cover some of your retirement income needs. Maybe many baby boomers are not as 'rich' as they seem.

Here is a link to the article

https://www.forbes.com/sites/josephcoug ... 4c3da72058
Last edited by rhornback on Tue Jun 12, 2018 9:10 pm, edited 2 times in total.

Grt2bOutdoors
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by Grt2bOutdoors » Tue Jun 12, 2018 8:23 pm

Assume the homeowner has no mortgage, what relevance does property taxes have on housing costs? You have to live somewhere, either you pay taxes or you pay rent there is no escaping cost.

In life you learn to compromise. You don’t like wells, you don’t like septic systems. Have you searched for what you like and more importantly, can you afford it?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

KlangFool
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by KlangFool » Tue Jun 12, 2018 8:28 pm

rhornback wrote:
Tue Jun 12, 2018 8:15 pm

Where does this end? I am unsure. If inflation goes up enough ultimately these houses will be sold for $750-1 million.
rhornback,

1) How is that possible when the income has not kept up with the inflation?

2) In summary,

A) Many folks are house poor.

B) House value may not keep with the inflation because the new generation does not want the same housing design as the previous generation. The trend of where to live and housing design had changed.

C) History repeats itself.

(B) is always true if you go back more than 20 to 30 years. We do not want the same house and location as our parents. But, as usual, we do not learn from history. And, the history repeats itself.

KlangFool

DavidRoseMountain
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by DavidRoseMountain » Tue Jun 12, 2018 8:58 pm

When I bought my modest house in near downtown Ann Arbor in Dec. 1994 it was not considered an ideal location because of the urban qualities around me. Consequently, my house was cheaper to buy than a comparably sized home in a more suburban locale.
Fast forward to today, my house is next to luxury condo development, and my house is worth more than the same size house in the suburban areas of Ann Arbor - the desire to live in a downtown setting has become the trend.

e5116
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by e5116 » Tue Jun 12, 2018 8:59 pm

Thanks for linking the article and interesting points RE: Chicago given that I also live in the Chicago area (purchased a home a few years ago in an inner-rung suburb that most would consider the most urban/walkable/diverse in Chicagoland). I have noticed the same thing with Boomers' homes that they bought in the still "prestigious" North Shore area from Wilmette to Glencoe with listings sometimes at the same price that they sold for 2003. Fifteen years with no appreciation (and actually negative if you're talking inflation adjusted) is a tough pill to swallow. And those places have a fairly easy 40-minute(ish) train ride to downtown Chicago, so not the more rural places you're talking about.

Things are much worse in "estates" farther away from urban centers, like Lake Forest and Barrington. Yes, Millennials these days don't want 4000+ sq ft mansions that are super far away from the city. Not sure what the future holds, but the fact that Chicago hasn't had a huge economic boom like some other places and the extremely high property taxes (no way taxes are the same they were in 2003, so the housing "price" has gone up, it just goes to the county instead ;)).

As for the Millenial shift in attitudes, I think society has just evolved and changed, so I expect the birth rates to continue to go down and Millenials to shun suburban/rural communities for more urban diverse environments with "action." One major aspect of this is the fact that women are just are likely to have a career these days and that is seen as a priority in their lives, whereas in the past getting married and starting a family was the major life priority for a large group of women. In fact, women are MORE educated than men these days and have degrees in larger numbers. Given that both Millenial men and women focus more on their career/work, I think it makes sense that prioritizing family has gone down by the wayside. In tandem with that, there is a push for "foodie" environments, urban walkability, amenities, and more, so suburbs look less and less appealing. Coupled with larger student debt and insanely high childcare costs and property taxes (in IL), and there are fewer people that feel having children is a worthwhile endeavor.

I honestly expect more of the same for a while, with some ebbing and flowing, but not for the market to take off like it did in the 2000s anytime soon, especially as interest rates continue to rise. I don't think people should view their primary home as an investment and should instead look to diversify their holdings and view any appreciation as good fortune that cannot be relied upon. Of course, with savings rates for the majority of Americans being pathetic, most don't actually take that view. Interesting days ahead....

Edited to add: with all the "doom and gloom" I noted above, Chicago has a ridiculous number of cranes and new buildings going up all over the city. For a while, it was second only to Seattle I believe. So, there is clearly still continued demand for new luxury type housing and developers think they can profit from the increased demand, but it happens to be concentrated in very specific (and urban) areas close to the city center. With the new inventory of smaller units in the city center and a generally stagnant (or even decreasing) population base in the broader metro area (Chicago used to rely on huge immigration influxes, especially from Mexico but that has slowed down considerably in recent years), lends itself to troubles in areas without all those cranes.

rhornback
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by rhornback » Tue Jun 12, 2018 9:23 pm

Grt2bOutdoors wrote:
Tue Jun 12, 2018 8:23 pm
Assume the homeowner has no mortgage, what relevance does property taxes have on housing costs? You have to live somewhere, either you pay taxes or you pay rent there is no escaping cost.

In life you learn to compromise. You don’t like wells, you don’t like septic systems. Have you searched for what you like and more importantly, can you afford it?
It is the size of the house and the area where the house is which raises the cost of living there. Most Baby Boomers bought large houses while they were in their peak earning years and when they were raising children. When retired they could move to a smaller house, with a lower cost of living, and lower taxes.

Where I live I have city water and sewer. And I can afford my house. Though I expect to take a loss when I sell it. Running the numbers it might make sense for me to take a loss and move to a lower cost of living area then continuing to pay for the maintenance, insurance, and taxes for my house after my kids leave it.

visualguy
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by visualguy » Tue Jun 12, 2018 9:28 pm

The drops in birth rates (2%-3%) aren't that huge, and immigration needs to be factored in as well as births. The article cites the study, but doesn't mention the percentage drops, instead making exaggerated statements like "Millennials just aren’t having kids".

investor997
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by investor997 » Tue Jun 12, 2018 9:43 pm

OP,

I wonder if your observation would be different if you weren't in Chicago or Illinois.

This article came across my newsfeed not too long ago:

http://www.chicagotribune.com/news/opin ... story.html

I'm hardly an expert on the matter but it seems as if Illinois' pension liabilities - and frequent tax increases - may be driving people out of state.

rhornback
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by rhornback » Tue Jun 12, 2018 9:51 pm

KlangFool wrote:
Tue Jun 12, 2018 8:28 pm
rhornback wrote:
Tue Jun 12, 2018 8:15 pm

Where does this end? I am unsure. If inflation goes up enough ultimately these houses will be sold for $750-1 million.
rhornback,

1) How is that possible when the income has not kept up with the inflation?

2) In summary,

A) Many folks are house poor.

B) House value may not keep with the inflation because the new generation does not want the same housing design as the previous generation. The trend of where to live and housing design had changed.

C) History repeats itself.

(B) is always true if you go back more than 20 to 30 years. We do not want the same house and location as our parents. But, as usual, we do not learn from history. And, the history repeats itself.

KlangFool
1. This assumes that income keeps up with inflation. Though generally buying power stays the same.

In my experience many people misunderstand how much money they actually make from their houses. I hear of people who stayed in their house for 30 years say they 'made' 100K etc. The question that should be asked is what is the return after commissions and real estate transfer taxes. Take that amount and compare it to the rate of return which would have been achieved if the same initial mortgage amount was invested in the S&P 500 (or dollar cost averaged in as a monthly payment).

The point is that inflation makes people believe that they have 'made money' due to higher salary and/or rising assets. But really it is about buying power. In many cases after inflation the buying power is about the same.

e5116
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by e5116 » Tue Jun 12, 2018 9:52 pm

investor997 wrote:
Tue Jun 12, 2018 9:43 pm
OP,

I wonder if your observation would be different if you weren't in Chicago or Illinois.

This article came across my newsfeed not too long ago:

http://www.chicagotribune.com/news/opin ... story.html

I'm hardly an expert on the matter but it seems as if Illinois' pension liabilities - and frequent tax increases - may be driving people out of state.
Possibly, but Chicago has actually added hundreds of thousands of high earners (as the city that probably has the most wage potential in the Midwest), and those are the types of people that would conceivably gobble up expensive real estate. It's the low and medium income earners that are moving out of Chicagoland, not the high earners.

http://www.cmap.illinois.gov/updates/al ... -stagnat-1
"The Chicago region’s slow economic growth affects regional mobility. The region’s lower- and moderate-income residents are especially susceptible to changing economic conditions and slow recessionary recovery. Prior CMAP analysis indicates that low- and moderate-income residents across all demographic groups have left the Chicago region over the last decade, potentially in search of greater economic opportunity elsewhere ... The number of people in the Chicago region age 16 and older earning less than $25,000 decreased by roughly 30,000 and 80,000 for the native- and foreign-born populations, respectively, between 2006-16. In contrast, the native- and foreign-born populations, respectively, added more than 300,000 and 80,000 people earning $75,000 or more."

rhornback
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by rhornback » Tue Jun 12, 2018 9:53 pm

investor997 wrote:
Tue Jun 12, 2018 9:43 pm
OP,

I wonder if your observation would be different if you weren't in Chicago or Illinois.

This article came across my newsfeed not too long ago:

http://www.chicagotribune.com/news/opin ... story.html

I'm hardly an expert on the matter but it seems as if Illinois' pension liabilities - and frequent tax increases - may be driving people out of state.
Yes Illinois is highly disappointing.

But I going back to the article I am observing these trends across the nation

1. Companies are moving downtown
2. Millennials are not hurry to get married / have a house for a variety of reasons
3. McMansions in many areas of the country are not selling very well

rhornback
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by rhornback » Tue Jun 12, 2018 9:55 pm

e5116 wrote:
Tue Jun 12, 2018 9:52 pm
investor997 wrote:
Tue Jun 12, 2018 9:43 pm
OP,

I wonder if your observation would be different if you weren't in Chicago or Illinois.

This article came across my newsfeed not too long ago:

http://www.chicagotribune.com/news/opin ... story.html

I'm hardly an expert on the matter but it seems as if Illinois' pension liabilities - and frequent tax increases - may be driving people out of state.
Possibly, but Chicago has actually added hundreds of thousands of high earners (as the city that probably has the most wage potential in the Midwest), and those are the types of people that would conceivably gobble up expensive real estate. It's the low and medium income earners that are moving out of Chicagoland, not the high earners.

http://www.cmap.illinois.gov/updates/al ... -stagnat-1
"The Chicago region’s slow economic growth affects regional mobility. The region’s lower- and moderate-income residents are especially susceptible to changing economic conditions and slow recessionary recovery. Prior CMAP analysis indicates that low- and moderate-income residents across all demographic groups have left the Chicago region over the last decade, potentially in search of greater economic opportunity elsewhere ... The number of people in the Chicago region age 16 and older earning less than $25,000 decreased by roughly 30,000 and 80,000 for the native- and foreign-born populations, respectively, between 2006-16. In contrast, the native- and foreign-born populations, respectively, added more than 300,000 and 80,000 people earning $75,000 or more."
An interesting, non-scientific, observation related to this is that many immigrants have moved to Chicago from 2006-2016. If immigrants are not as welcome in the U.S. I would expect this number to fall.

My last neighborhood was probably 25% immigrants and my current neighborhood is probably 50% immigrant. Both areas were high income.

rhornback
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by rhornback » Tue Jun 12, 2018 9:57 pm

(delete)
Last edited by rhornback on Tue Jun 12, 2018 10:17 pm, edited 1 time in total.

KlangFool
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by KlangFool » Tue Jun 12, 2018 9:57 pm

rhornback wrote:
Tue Jun 12, 2018 9:51 pm
KlangFool wrote:
Tue Jun 12, 2018 8:28 pm
rhornback wrote:
Tue Jun 12, 2018 8:15 pm

Where does this end? I am unsure. If inflation goes up enough ultimately these houses will be sold for $750-1 million.
rhornback,

1) How is that possible when the income has not kept up with the inflation?

2) In summary,

A) Many folks are house poor.

B) House value may not keep with the inflation because the new generation does not want the same housing design as the previous generation. The trend of where to live and housing design had changed.

C) History repeats itself.

(B) is always true if you go back more than 20 to 30 years. We do not want the same house and location as our parents. But, as usual, we do not learn from history. And, the history repeats itself.

KlangFool
1. This assumes that income keeps up with inflation. Though generally buying power stays the same.
rhornback,

<<1. This assumes that income keeps up with inflation. >>

This is not true over the last 20+ years.

<<Though generally buying power stays the same. >>

It has not kept up with inflation. Folks borrow more in order to buy the same house.

KlangFool

rhornback
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by rhornback » Tue Jun 12, 2018 10:15 pm

e5116 wrote:
Tue Jun 12, 2018 8:59 pm
One major aspect of this is the fact that women are just are likely to have a career these days and that is seen as a priority in their lives, whereas in the past getting married and starting a family was the major life priority for a large group of women. In fact, women are MORE educated than men these days and have degrees in larger numbers. Given that both Millenial men and women focus more on their career/work, I think it makes sense that prioritizing family has gone down by the wayside. In tandem with that, there is a push for "foodie" environments, urban walkability, amenities, and more, so suburbs look less and less appealing. Coupled with larger student debt and insanely high childcare costs and property taxes (in IL), and there are fewer people that feel having children is a worthwhile endeavor.
Thank you for the interesting and thorough analysis. Taking this discussion a separate direction, I have a 16 year old daughter who will be a junior in high school this year.

I will do everything I can to educate and support my daughter to have her own career, be self supporting and non-dependent on a husband. The result of this will probably be that she will no get married until around 30 and then have one or at the most two kids. This would be consistent with what you are writing above.

However, I wonder by doing this how much she will 'leave and cleave' to her husband. I wonder if she will be happier with fewer children. I wonder if this independence leads to more woman staying unmarried because they are unable or unwilling to find a suitable spouse or increases the chances of divorce because the woman can easily be financially independent.

Sometimes I wonder if these changes will be for the good of the next generation.

rhornback
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by rhornback » Tue Jun 12, 2018 10:16 pm

rhornback wrote:
Tue Jun 12, 2018 9:55 pm
e5116 wrote:
Tue Jun 12, 2018 9:52 pm
investor997 wrote:
Tue Jun 12, 2018 9:43 pm
OP,

I wonder if your observation would be different if you weren't in Chicago or Illinois.

This article came across my newsfeed not too long ago:

http://www.chicagotribune.com/news/opin ... story.html

I'm hardly an expert on the matter but it seems as if Illinois' pension liabilities - and frequent tax increases - may be driving people out of state.
Possibly, but Chicago has actually added hundreds of thousands of high earners (as the city that probably has the most wage potential in the Midwest), and those are the types of people that would conceivably gobble up expensive real estate. It's the low and medium income earners that are moving out of Chicagoland, not the high earners.

http://www.cmap.illinois.gov/updates/al ... -stagnat-1
"The Chicago region’s slow economic growth affects regional mobility. The region’s lower- and moderate-income residents are especially susceptible to changing economic conditions and slow recessionary recovery. Prior CMAP analysis indicates that low- and moderate-income residents across all demographic groups have left the Chicago region over the last decade, potentially in search of greater economic opportunity elsewhere ... The number of people in the Chicago region age 16 and older earning less than $25,000 decreased by roughly 30,000 and 80,000 for the native- and foreign-born populations, respectively, between 2006-16. In contrast, the native- and foreign-born populations, respectively, added more than 300,000 and 80,000 people earning $75,000 or more."
An interesting, non-scientific, observation related to this is that many immigrants have moved to Chicago from 2006-2016. If immigrants are not as welcome in the U.S., what will be the long term impact.

My last neighborhood was probably 25% immigrants and my current neighborhood is probably 50% immigrant. Both areas were high income. One could argue that immigrants have supported the housing prices where I live.

Glockenspiel
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Glockenspiel » Tue Jun 12, 2018 10:25 pm

Daycare costs, student loans, housing costs relative to salaries, and baby boomers’ decisions to “kick the can down the road” are the main reasons why millennials aren’t having as many kids as boomers did.

Nate79
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Nate79 » Tue Jun 12, 2018 11:23 pm

I think there are a lot of stereotypes and conclusions being drawn off of those stereotypes. But kids grow up, maybe a little later than normal but I think there will be much less change and impact than all of the worry. The same worry about housing changes is also said about the auto industry where everyone is going to be ride sharing and no one will own a car. I'll believe this all when I see it. Call me an extreme doubter.

Ragnoth
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Ragnoth » Wed Jun 13, 2018 12:43 am

I think there are deeper problems than Millennials not having kids.

Anecdotally, I know plenty of people that would be more inclined to buy up homes in the burbs and raise a family if they thought they could afford it. Bogleheads aside, there is an enormous amount of debt (either personal or student debt) hanging over most 20-30 somethings. On top of that, there are studies showing that economic shocks early in their earning years have tanked their lifetime earning potential (at least, as compared to what it used to be and what it was for the prior generation). It's true that this has also delayed household formation and child-rearing... but I think that's really the secondary issue here.

It's easy to talk about young people moving into cities and consuming avocado toast, but sometimes this just masks their financial insecurity. Presenting oneself as some modern bohemian sophisticate isn't always the end-goal, sometimes it's a consolation prize for a generation that got dealt a bum hand and thought their best bet of finding a well-paying job was a HCOL metropolis. If and when they catch up financially, I think you will see them buying up inventory same as the generations that came beforehand.

That said, in the interim there is a huge cohort of baby-boomers who will be trying to downsize more or less at the same time. Hopefully it will work out for them in the end, but I wouldn't be surprised if many of them have to take a lower price or wait it out another ~5 years.

FireProof
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by FireProof » Wed Jun 13, 2018 4:30 am

I don't buy the idea that young people today will "mature" some day and discover their love of cul-de-sacs and two-car garages.

Cities today are just objectively a much better place to live today than they were in the 70s and 80s, when Boomers were buying their McMansions. Crime rates of all types have absolutely plummeted. Another thing is that integration and immigration don't scare Millenials nearly as much, because a lot of them are themselves minorities. In conjunction with this, downtowns have become much more interesting, vibrant places. Even if the tastes of Millenials were exactly the same as of previous generations, the VALUE proposition is totally different.

Which isn't to say that many of them won't be forced there by astronomical housing prices.

Jags4186
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Jags4186 » Wed Jun 13, 2018 6:20 am

It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.

I suspect that since people are delaying when they get together and have kids, that is why it seems millenials don’t want suburban houses. In fact, Boomers should be happy this is going on. They are living longer than ever. Sure life expectancy is 82 years old or around there, but once you make it to 65, your life expectancy is near 90. If boomers were to sell their big house at age 65 to a millenial, they’d probably blow through that money and still have many years left to live. Sell the house in your late 70s to a family in their 40s and then you will have money for the last the remaining 10-20 years of your life.

It’s also important to note that while home prices have risen relative to wages, many people can still buy a home. If you go by this website, it seems like practically no one is every qualified to buy a home. We have “rules” spouted around like “you need 2x the value of the home in a portfolio before you can buy a home”. Well if people are waiting to be in a better position to buy, it just takes longer to buy. How many 20 and 30 year old people who bought houses in the 70s and 80s for $50k-$200k had $100k-$400k in their portfolios in addition to the money required to purchase a home?

Glockenspiel
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Glockenspiel » Wed Jun 13, 2018 6:31 am

Jags4186 wrote:
Wed Jun 13, 2018 6:20 am
It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.
I’m an old millennial born in 1985 who also didn’t have the internet in my home until age 13. Anecdotally, I met my wife in college, then we moved to another city 4 hours away. Once we moved to our city, we bought our first very suburban home, (4 bed, 3 bath, 2-story, 3 car garage), when we were 25, in 2010. We wanted to buy something for the future, even though we didn’t have our first kid until 2015.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by SagaciousTraveler » Wed Jun 13, 2018 7:05 am

I can only give perspective on older millennials as I am one.

I don't necessary agree with everything in the article but I believe one main point is missing from the conversation. Parents did a poor job teaching their millennial children about finances and debt:

*Majority simply fell in line and took out massive student loans. Where was the advice to work through school or attend community college for the first few years? My parents were not able to provide any money for school but they provided food/shelter. I worked three jobs and paid my own way without debt.

*The advice on borrowing a car is cringe worthy and inexcusable. The length of auto loans just hit an all time high (Source: Clark Howard) as well as the default rate. I see it with my friends who go with the 0% APR for 72 months and buy the most ridiculous car/suv.

*If Millennials are able to buy a house in the suburbs, they are building. They are building and are doing so without regard to their financial future. Off the top of my head I'm having a hard time thinking of friends that haven't built a new house that was under 2500 sq. ft. and did do so with a 30 year mortgage and less than 10% down.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by itsgot8 » Wed Jun 13, 2018 7:30 am

Jags4186 wrote:
Wed Jun 13, 2018 6:20 am
It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.

I suspect that since people are delaying when they get together and have kids, that is why it seems millenials don’t want suburban houses
. In fact, Boomers should be happy this is going on. They are living longer than ever. Sure life expectancy is 82 years old or around there, but once you make it to 65, your life expectancy is near 90. If boomers were to sell their big house at age 65 to a millenial, they’d probably blow through that money and still have many years left to live. Sell the house in your late 70s to a family in their 40s and then you will have money for the last the remaining 10-20 years of your life.
Ding! Ding! Ding! We have a winner!

I also am an elder millennial and there's a huge gap between myself and those 'other' millennials five to 10 years younger than myself. City life may be fun when you're single or just dating someone but when a couple decides to settle down and start a family, most will head for the suburbs so they can have a space of their own. As Jags pointed out, most of them are not quite there at this point in time. That can be due to millennials delaying families and/or waiting for their income to allow such a move.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by SelfEmployed123 » Wed Jun 13, 2018 7:38 am

itsgot8 wrote:
Wed Jun 13, 2018 7:30 am
Jags4186 wrote:
Wed Jun 13, 2018 6:20 am
It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.

I suspect that since people are delaying when they get together and have kids, that is why it seems millenials don’t want suburban houses
. In fact, Boomers should be happy this is going on. They are living longer than ever. Sure life expectancy is 82 years old or around there, but once you make it to 65, your life expectancy is near 90. If boomers were to sell their big house at age 65 to a millenial, they’d probably blow through that money and still have many years left to live. Sell the house in your late 70s to a family in their 40s and then you will have money for the last the remaining 10-20 years of your life.
Ding! Ding! Ding! We have a winner!

I also am an elder millennial and there's a huge gap between myself and those 'other' millennials five to 10 years younger than myself. City life may be fun when you're single or just dating someone but when a couple decides to settle down and start a family, most will head for the suburbs so they can have a space of their own. As Jags pointed out, most of them are not quite there at this point in time. That can be due to millennials delaying families and/or waiting for their income to allow such a move.
I'm also an older millennial. I agree that city life is great when you're in your 20s. However, when you have kids the allure of good schools is VERY strong. Most of the good schools are still in the suburbs. A majority of millennials probably cannot afford private schools, so we will be heading to the suburbs eventually. Baby boomers shouldn't worry too much. Eventually millennials will want to buy your homes, just when we're ready. Millennials have been pursuing graduate degrees and/or paying off student loans more than any other generation. That delays a lot of other things like buying a home or starting a family. I guess you could call us late bloomers.
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by rhornback » Wed Jun 13, 2018 7:38 am

SagaciousTraveler wrote:
Wed Jun 13, 2018 7:05 am
*Majority simply fell in line and took out massive student loans. Where was the advice to work through school or attend community college for the first few years? My parents were not able to provide any money for school but they provided food/shelter. I worked three jobs and paid my own way without debt.

*The advice on borrowing a car is cringe worthy and inexcusable. The length of auto loans just hit an all time high (Source: Clark Howard) as well as the default rate. I see it with my friends who go with the 0% APR for 72 months and buy the most ridiculous car/suv.

*If Millennials are able to buy a house in the suburbs, they are building. They are building and are doing so without regard to their financial future. Off the top of my head I'm having a hard time thinking of friends that haven't built a new house that was under 2500 sq. ft. and did do so with a 30 year mortgage and less than 10% down.
More anecdotal observations.

1. I am a production of junior college. I also have a bachelor and a master's degree. Since this worked for me I have asked my kids to do likewise. My son is just finishing his jr college education and will be going to a top 100 school in the fall. It is about 80. I grant you it is not Harvard but it is respectable.

When I talk to other parents where I live about this and I mention jr college their minds turn off. Most would not consider this. Yet my observation is like yours, they have no problem with their kids going into debt for school. Weird.

2. When I was young a common car loan was 3 years. Now they seem to be 5 years. My wife and I bought a sub compact, a Saturn for our first vehicle. Our friends bought fancy cars which I assume they had hefty loans for. Weird #2.

3. I also wonder about the level of basic financial knowledge and basic economics in the population. This includes millenials and baby boomers. Maybe this is not taught in school or in college and should be. Sometimes I tell my wife that 'some poor people deserve to be poor based on their decisions'. I grew up in a blue collar area. When someone did not have something they did without. I no longer see this. Instead I see access to easy credit and the need to keep up with the jones driving the accumulation of items that people do not need or could wait for.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by renue74 » Wed Jun 13, 2018 7:48 am

Glockenspiel wrote:
Tue Jun 12, 2018 10:25 pm
Daycare costs, student loans, housing costs relative to salaries, and baby boomers’ decisions to “kick the can down the road” are the main reasons why millennials aren’t having as many kids as boomers did.
+1

I have a small web design agency and employee 3 millennials. None own home. When the conversation comes up, there are a few more points they make:

• "We saw how the 2008 housing bubble screwed so many people over. Why take a chance this time around?"

• "We like the freedom of renting. If we want to move after our lease is up, we can go anywhere."

• "We don't want to cut grass and worry about replacing a $5,000 air conditioner. Owning a home has a ton more expenses."

None of my employees are heavily in debt and they all have boyfriends/girlfriends they live with. I'm not sure if they even think about saving money for a down payment on a home. They never mention saving for a house.

They also don't have kids...and range from 22, 27, and 32 years old.

Homeownership just isn't a checkbox for them. I'm 43 and when I got married at 25, we bought a starter house 1 year later.

They just don't think like that.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Hoosierdom » Wed Jun 13, 2018 7:57 am

SelfEmployed123 wrote:
Wed Jun 13, 2018 7:38 am
itsgot8 wrote:
Wed Jun 13, 2018 7:30 am
Jags4186 wrote:
Wed Jun 13, 2018 6:20 am
It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.

I suspect that since people are delaying when they get together and have kids, that is why it seems millenials don’t want suburban houses
. In fact, Boomers should be happy this is going on. They are living longer than ever. Sure life expectancy is 82 years old or around there, but once you make it to 65, your life expectancy is near 90. If boomers were to sell their big house at age 65 to a millenial, they’d probably blow through that money and still have many years left to live. Sell the house in your late 70s to a family in their 40s and then you will have money for the last the remaining 10-20 years of your life.
Ding! Ding! Ding! We have a winner!

I also am an elder millennial and there's a huge gap between myself and those 'other' millennials five to 10 years younger than myself. City life may be fun when you're single or just dating someone but when a couple decides to settle down and start a family, most will head for the suburbs so they can have a space of their own. As Jags pointed out, most of them are not quite there at this point in time. That can be due to millennials delaying families and/or waiting for their income to allow such a move.
I'm also an older millennial. I agree that city life is great when you're in your 20s. However, when you have kids the allure of good schools is VERY strong. Most of the good schools are still in the suburbs. A majority of millennials probably cannot afford private schools, so we will be heading to the suburbs eventually. Baby boomers shouldn't worry too much. Eventually millennials will want to buy your homes, just when we're ready. Millennials have been pursuing graduate degrees and/or paying off student loans more than any other generation. That delays a lot of other things like buying a home or starting a family. I guess you could call us late bloomers.
I have a different perspective.

I'm also an older millennial and I have zero interest in moving to the burbs. If I had to financially I would consider it, but only if I truly had to. My current house is less than half the size of what I could buy a half an hour out of town and I can't imagine ever upsizing. Most of my friends, including several with kids, that can't afford a city house are just living in a city apartment instead. Maybe that will change as the kids get older, but I doubt it. I do have some friends that are considering moving to a smaller city (Cleveland, Madison, Boulder).

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by London » Wed Jun 13, 2018 8:02 am

All these formulaic articles forget to mention a few things:

1. There is a generation between baby boomers and millennial and they do buy houses.

2. Immigration makes up for the lower birth rate.

Im bored with the constant drum beat of "millennials don't want houses in the suburbs". Generalizations without statistical backup don't mean much.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by humanities » Wed Jun 13, 2018 8:05 am

The flip side of this is that many cities have limited housing stock, thanks in part to zoning laws. City populations can only grow so far. I would not worry about the future of suburbs.

I would worry about families that chose to make large suburban houses their primary investment. It is not prudent to choose as a primary investment something that is illiquid and not diversified. It makes more financial sense to buy only as much house as the family really needs. A larger house is a luxury. The luxury may be worth it, but it's not likely to be the best investment.

It has always been a bad financial decision to buy a large house made with cheap materials or with questionable design choices.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by bgf » Wed Jun 13, 2018 8:06 am

Jags4186 wrote:
Wed Jun 13, 2018 6:20 am
It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.

I suspect that since people are delaying when they get together and have kids, that is why it seems millenials don’t want suburban houses. In fact, Boomers should be happy this is going on. They are living longer than ever. Sure life expectancy is 82 years old or around there, but once you make it to 65, your life expectancy is near 90. If boomers were to sell their big house at age 65 to a millenial, they’d probably blow through that money and still have many years left to live. Sell the house in your late 70s to a family in their 40s and then you will have money for the last the remaining 10-20 years of your life.

It’s also important to note that while home prices have risen relative to wages, many people can still buy a home. If you go by this website, it seems like practically no one is every qualified to buy a home. We have “rules” spouted around like “you need 2x the value of the home in a portfolio before you can buy a home”. Well if people are waiting to be in a better position to buy, it just takes longer to buy. How many 20 and 30 year old people who bought houses in the 70s and 80s for $50k-$200k had $100k-$400k in their portfolios in addition to the money required to purchase a home?
born in '85. have a wife and 1.5 year old daughter. i agree. i think the trend is merely delayed. preferences change from generation to generation, but number of bathrooms, having a yard, convenience to work, good schools, etc. these preferences don't change. the millennial generation will not always be unmarried, "child free," and living in a $2500 per month studio in a metropolis. its just going to take time, but the shift will happen.
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by nedsaid » Wed Jun 13, 2018 8:18 am

What I will say from my vantage point is that the cost of housing in certain metropolitan areas is zooming and you wonder where it will stop. This makes it pretty difficult for young people trying to get established. Employers also seem to have a shorter term outlook, employment seems to be more "just in time", employers are more fickle. This makes it harder to make long term plans. Today, if you hold a job for more than 3-5 years, something is wrong. The expectation is that you have to reinvent yourself probably every 10-20 years and possibly have 3-4 careers. So it is a different world that the boomers faced.
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Glockenspiel » Wed Jun 13, 2018 8:20 am

bgf wrote:
Wed Jun 13, 2018 8:06 am
its just going to take time, but the shift will happen.
I mostly agree. Old millennials are in their early/mid 30s. The average U.S. man is getting married at age 29. Then may wait a few more years before deciding they are financially ready to have kids. As long as suburban schools are "generally" better than big city schools, people with children will move to the schools that will set their children up for success.

I think the mindset IS changing though, and millennials, even with kids, are MORE reluctant to leave the city with the amenities and more efficient lifestyle. But ask this question again in 10 years and I don't think the suburbs will be ghost towns.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by SagaciousTraveler » Wed Jun 13, 2018 8:21 am

rhornback wrote:
Wed Jun 13, 2018 7:38 am
More anecdotal observations.

1. I am a production of junior college. I also have a bachelor and a master's degree. Since this worked for me I have asked my kids to do likewise. My son is just finishing his jr college education and will be going to a top 100 school in the fall. It is about 80. I grant you it is not Harvard but it is respectable.

When I talk to other parents where I live about this and I mention jr college their minds turn off. Most would not consider this. Yet my observation is like yours, they have no problem with their kids going into debt for school. Weird.

2. When I was young a common car loan was 3 years. Now they seem to be 5 years. My wife and I bought a sub compact, a Saturn for our first vehicle. Our friends bought fancy cars which I assume they had hefty loans for. Weird #2.

3. I also wonder about the level of basic financial knowledge and basic economics in the population. This includes millenials and baby boomers. Maybe this is not taught in school or in college and should be. Sometimes I tell my wife that 'some poor people deserve to be poor based on their decisions'. I grew up in a blue collar area. When someone did not have something they did without. I no longer see this. Instead I see access to easy credit and the need to keep up with the jones driving the accumulation of items that people do not need or could wait for.
Exactly. I understand that saying your kid is going to attend Junior college isn't sexy and with it comes a stigma that your child isn't 'smart' enough. But who cares? If people walked around with a debt figure above their heads, they'd care less about all these materialistic things.

I stand by my point that this isn't a millennial seeking a simpler life issue, its an American financial education problem. I can't think of another generation coming into adulthood only to quickly find themselves in Car, Student Loan and Medical debt. The first two are self inflicted the latter is a product of capitalism and legislation failing us.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by likegarden » Wed Jun 13, 2018 8:25 am

This article seems to relate to big cities like Chicago and NY City. I live in an area with smaller cities and smaller towns acting like suburbs to the cities. Young couples still buy houses and have kids. We still have a boom in building $350,000 houses. We have city water and sewer, also have a very good public school system in my town. We live in our house now for 30 years; 40 year old 2500 sqft house goes for $290,000. We do not need the money of that house for retirement, is in a trust for kid.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by MnD » Wed Jun 13, 2018 8:40 am

Millennials having kids and wanting to get out of noisey multi-family housing urban living are making houses in our inner-ring suburb look more like winning lotto tickets. Leafy green quiet 8 miles from downtown Denver, walkable/bikeable to light rail stations and a trendy authentic old town center. From 1991 the smaller homes in the neighborhood are up about 10X and the bigger ones are up around 7X.

Things like well, septic, horse-ranch sized lawns, 1.5 hour one-way commutes and the "Illinois" factor sounds more like the problems versus millennials.
The ones around here seem to have plenty of money to buy the baby-boomer houses. I could have 100 of them traipsing through our place and an unconditional over listing price offer if I listed it tomorrow. I feel sorry for their wallets - prices are just crazy and supply is next-to-nothing.

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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by kmurp » Wed Jun 13, 2018 9:03 am

Grt2bOutdoors wrote:
Tue Jun 12, 2018 8:23 pm
Assume the homeowner has no mortgage, what relevance does property taxes have on housing costs? You have to live somewhere, either you pay taxes or you pay rent there is no escaping cost.

In life you learn to compromise. You don’t like wells, you don’t like septic systems. Have you searched for what you like and more importantly, can you afford it?
When property/school taxes approach 3%, like in my area, downsizing is very appealing. The process the OP described is already in effect where I live. 500k houses seem to not move whereas 300k does. I’m one of those boomers with 30 years in a house with renovations wiping out all nominal gains.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Psyayeayeduck » Wed Jun 13, 2018 9:19 am

As one of the oldest millennials out there (born in 1981 according to the Pew Research Center and known member of the Oregon Trail Generation), there are so many combinations of factors out there that it is hard to quantify the reasoning behind the Forbes article. From a strictly financial point of view, there are factors that play a role on why Millennials are not buying housing with enthusiasm.

- Debt: This is a big killer here. Student loan debt, credit card debt, car loan debt, etc. IMO, student loan is the deadliest as it rarely discharged through bankruptcy except for extreme cases. If you don't have the salary to pay off your debts in a reasonable rate, this will follow you everywhere you go no matter what you do. That will always take a chunk of your take home pay no matter what until the student loans are paid off or the monthly payments are deferred in some way.

- Stagnant pay: All the news about unemployment being low is great but if your take home pay can't keep up with inflation, then you are effectively getting a pay cut every year. While expenses increase, your buying power become less powerful. Millennials know this. Loyalty is rarely rewarded these days. The days of being with a company for 10, 20, 30 years are as rare as pensions. There is an accepted paradigm that one needs to change jobs every 2-5 years to get proper salary increases.

- Increased Costs: Related to my previous point, expenses are great at keeping up with inflation but the pay does not. So now things that cost $X today would cost $X+$Y next year. A great example is the medical costs of just having a kid. I'm not even including the other necessities in the first few years of raising a kid.


I have yet even touch the social aspects and the paradigm shifts Millennials embrace versus the Baby Boomers and the Gen Xers (which is worthy of a separate post in itself).

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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by sschoe2 » Wed Jun 13, 2018 9:28 am

Grt2bOutdoors wrote:
Tue Jun 12, 2018 8:23 pm
what relevance does property taxes have on housing costs? You have to live somewhere, either you pay taxes or you pay rent there is no escaping cost.
Huge in here in Illinois, NJ, and several other corrupt and badly run states. A modest home in Illinois can generate a $10k a year property tax bill. Considering IL has pension obligations >$200E9 unpaid bills >$15E9, local govt units also insolvent, and population fleeing in droves from the state there is a real risk that govts can literally tax you out of your home, destroy the housing market and economy, and you can literally end up a hostage here.

Due to a job I am kind of stuck in Illinois for the forseeable future and am leaning towards buying a small ranch for about $250k but the situation with the govt scares me to death and I absolutely hate the govt here.

I am a Gen X (37) borderline millennial and yep don't want kids, but mainly due to my dogs want to own a home since I am likely going to spend my career in one job, and hate city living and prefer the suburbs.
Last edited by sschoe2 on Wed Jun 13, 2018 9:33 am, edited 1 time in total.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by jayk238 » Wed Jun 13, 2018 9:33 am

rhornback wrote:
Tue Jun 12, 2018 8:15 pm
I wanted to share this article which I found very interesting. The article has a few thoughts but the ones I got from it are:

1. Lots of baby boomer expect equity for their homes as part of their retirement savings plans
2. Millennials cannot afford and do not necessarily want these homes

I relate better to the circumstances around me. I live in the suburbs of Chicago. Of course there are those who live in Southern California, Portland, Seattle and other areas of hot real estate markets which will be different.

Where I live I think it is an accurate statement that many boomers are expecting a positive return on investment for their houses. And I suspect because as a nation we do not save very well, that many boomers have a lot of capital tied up on their homes achieved by paying off their houses over the last 30 years.

Where I live there are so called estate homes. Homes with big yards with well and septic systems. IMO many of the owners of these estate homes tried to mimic the country estates of old wealth which are seen on TV. But I feel the world has moved on. Personally a well and septic system does not appeal to me and I do not want a lawn so large that I need to hire a service to cut and maintain it.

The other part of this mix are houses in the villages. Many of these homes started small but have been extensively expanded and remodeled. These are narrow lots but very deep. When you look at the houses they look small from the front but many of them have been extended backwards quite a bit where the backyards used to be.

Homes where I live around 500K seems to sell OK. Homes over 500K do not seem to take longer to sell. I assume this is partially because conventional loans end around $450K and the other reason is this is there is a limit to which young couples can afford.

The problem is many of the owners of 'estate' homes and extensively remolded homes have spent a lot on their homes and they may be worth less than they invested into them.

There seems to be a shadow inventory of houses where I live, where people would like to sell their houses but not at current market rates. In other words, they would sell their homes for 750K but not for 500k or 600K.

I believe this problem is exasperated by a trend of corporations to move into the city. Where I live a commute into the city at best 1.5 hours each way. This includes driving to the train station, parking, taking the train, walking or taking a bus to the office. Many millennials IMO find this distasteful. Frankly, I myself would not be trilled to have to work in the city.

Where does this end? I am unsure. If inflation goes up enough ultimately these houses will be sold for $750-1 million. But that would be inflation adjusted money. The real buying power would be diluted. The alternative is ultimately the baby boomers will get sick enough, old enough, or pass on and the homes will be sold at market rate through the estate.

In the mean time the tax obligations given to homeowners in Illinois keep going up. You could make the argument that it would make more financial sense to take a loss on your house and move to a smaller house in an area with lower taxes than it would to keep your big house with the expectation of a return in the future. The reason is the high yearly cost of maintenance, insurance, and real estate taxes.

But that does not solve the problem of expecting a certain amount of capital from your home sale to cover some of your retirement income needs. Maybe many baby boomers are not as 'rich' as they seem.

Here is a link to the article

https://www.forbes.com/sites/josephcoug ... 4c3da72058
I made a post about this exact issue months ago here. Just theorizing this possibility and it got closed because it was speculation. Interesting how some threads are ok and others arent.

MiddleOfTheRoad
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by MiddleOfTheRoad » Wed Jun 13, 2018 9:39 am

Are these the same millenials that will inherit trillions of dollars from their parents/grandparents?

https://www.cnbc.com/2015/01/13/coming- ... story.html

These people will have a lot of money to buy...

wrongfunds
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by wrongfunds » Wed Jun 13, 2018 9:42 am

If immigrants are not as welcome in the U.S. I would expect this number to fall.

My last neighborhood was probably 25% immigrants and my current neighborhood is probably 50% immigrant. Both areas were high income.
100% of the houses sold in the community that I live in and the communities that my friends live in are sold to immigrants from SE Asia. If those immigrants are kept off the US border, expect the entire economy to come crashing down.

alfaspider
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by alfaspider » Wed Jun 13, 2018 9:43 am

Hoosierdom wrote:
Wed Jun 13, 2018 7:57 am
SelfEmployed123 wrote:
Wed Jun 13, 2018 7:38 am
itsgot8 wrote:
Wed Jun 13, 2018 7:30 am
Jags4186 wrote:
Wed Jun 13, 2018 6:20 am
It’s too early to make judgments on millenials. I am an “old” millenial, born in 1986. I didn’t have a computer in the house I was allowed to touch until I was 12, and we didn’t have the internet until I was 14. My wife and I just bought our first home, in the suburbs. Millenials range from ages about 18-36. That means most millenials are under 30. When I was in my 20s, I didn’t want to live in the suburbs, I wanted to live in the city where there were lots of girls and lots of bars. It didn’t matter that my work commute was inconvenient. Once I met my future wife, we began less and less to avail ourselves of “city life”, eventually moving out to a suburb apartment more convenient to work, and then buying a home in a suburb where we can start our family.

I suspect that since people are delaying when they get together and have kids, that is why it seems millenials don’t want suburban houses
. In fact, Boomers should be happy this is going on. They are living longer than ever. Sure life expectancy is 82 years old or around there, but once you make it to 65, your life expectancy is near 90. If boomers were to sell their big house at age 65 to a millenial, they’d probably blow through that money and still have many years left to live. Sell the house in your late 70s to a family in their 40s and then you will have money for the last the remaining 10-20 years of your life.
Ding! Ding! Ding! We have a winner!

I also am an elder millennial and there's a huge gap between myself and those 'other' millennials five to 10 years younger than myself. City life may be fun when you're single or just dating someone but when a couple decides to settle down and start a family, most will head for the suburbs so they can have a space of their own. As Jags pointed out, most of them are not quite there at this point in time. That can be due to millennials delaying families and/or waiting for their income to allow such a move.
I'm also an older millennial. I agree that city life is great when you're in your 20s. However, when you have kids the allure of good schools is VERY strong. Most of the good schools are still in the suburbs. A majority of millennials probably cannot afford private schools, so we will be heading to the suburbs eventually. Baby boomers shouldn't worry too much. Eventually millennials will want to buy your homes, just when we're ready. Millennials have been pursuing graduate degrees and/or paying off student loans more than any other generation. That delays a lot of other things like buying a home or starting a family. I guess you could call us late bloomers.
I have a different perspective.

I'm also an older millennial and I have zero interest in moving to the burbs. If I had to financially I would consider it, but only if I truly had to. My current house is less than half the size of what I could buy a half an hour out of town and I can't imagine ever upsizing. Most of my friends, including several with kids, that can't afford a city house are just living in a city apartment instead. Maybe that will change as the kids get older, but I doubt it. I do have some friends that are considering moving to a smaller city (Cleveland, Madison, Boulder).
Older millenial as well. I think the difference is this: a generation ago, moving to the suburbs was pretty much assumed. That is what one did when one had kids. The "inner city" was considered a scary place with drugs and crime- you stayed if you had no other option. People commuted to the central business district but retreated to the "safe" suburbs without even bothering to stick around for a drink.

Today, many cities have experienced significant revitalization and are much more desirable places. Given unlimited funds, many millenials would prefer to stay in the city. However, it takes a lot of money to buy a place that is both in the city and big enough to raise a family in comfort, so many move to the suburbs in order to find housing they can afford. School districts also tend to lag neighborhoods in improvement, so staying in the city often means private school costs or having your kid attend a sub-par school. Obviously, people have different desires and locations can vary quite a bit.

grog
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by grog » Wed Jun 13, 2018 9:46 am

Glockenspiel wrote:
Tue Jun 12, 2018 10:25 pm
Daycare costs, student loans, housing costs relative to salaries, and baby boomers’ decisions to “kick the can down the road” are the main reasons why millennials aren’t having as many kids as boomers did.
Yeah, I think a lot of the alleged millennial "preferences" are not so much preferences as basic responses to their economic circumstances.

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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Glockenspiel » Wed Jun 13, 2018 10:21 am

MiddleOfTheRoad wrote:
Wed Jun 13, 2018 9:39 am
Are these the same millenials that will inherit trillions of dollars from their parents/grandparents?

https://www.cnbc.com/2015/01/13/coming- ... story.html

These people will have a lot of money to buy...
More proof of the truth of baby boomers "kicking the can down the road."

cherijoh
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by cherijoh » Wed Jun 13, 2018 10:21 am

rhornback wrote:
Tue Jun 12, 2018 9:51 pm
1. This assumes that income keeps up with inflation. Though generally buying power stays the same.
I think you missed KF's point. Overall salaries have NOT keep up with inflation on non-discretionary items like housing costs, health care, etc. Therefore purchasing power isn't the same - it just gets masked because prices for tech gadgets have come down and we are importing lots of cheap clothing (that doesn't have nearly the same quality of decades ago).

In addition, prior to the high inflation of the 70s to early 80s, most people were paid straight salary (no bonuses) unless they were commissioned sales people or senior executives. So any annual increase in salary was based on the total amount of your compensation. Nowadays individual contributors and mid-level managers are receiving a good chunk of their total compensation from "bonuses" which are totally discretionary and not subject to your annual increase. This is designed to make employees think they are keeping up with inflation when it is often not the case.

Coato
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Coato » Wed Jun 13, 2018 10:29 am

"Exactly. I understand that saying your kid is going to attend Junior college isn't sexy and with it comes a stigma that your child isn't 'smart' enough. But who cares? If people walked around with a debt figure above their heads, they'd care less about all these materialistic things.

I stand by my point that this isn't a millennial seeking a simpler life issue, its an American financial education problem. I can't think of another generation coming into adulthood only to quickly find themselves in Car, Student Loan and Medical debt. The first two are self inflicted the latter is a product of capitalism and legislation failing us."

Here is the issue. Community Colleges (at least in CA) are a trap for a lot of kids. Many of them cannot get the classes to get out for 4 or 5 years. They have sequences to go through and if they can't get an English 1b class they have to wait a semester. Then they run into problems with 2a etc etc. When you compound this across all of the required strands a lot of kids can't get out and give up.

As a high school teacher I tell those kids to sign up for four years of military, get the two free years of online ed (expensive) and get out after four with four years paid to go to an expensive bachelor program for two years and get two years of an advanced degree paid for.

The proposals to make CC free are only going to exacerbate the problems for the kid who is truly trying to go their as a stepping stone.

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Cycle
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by Cycle » Wed Jun 13, 2018 10:30 am

My wife and I are millennials, having our first child when my wife is 36 this January.

We choose to live in a blue collar neighborhood in the city to keep costs low and we like a bikeable/walkable neighborhood, the benefits of which are too many to list here. The idea of driving 4000lbs of material around every day seems wasteful to me, so I opt to use biking and public transit/Uber for most trips.

Like many millennials, we maxed out our savings during the great bull market and so achieved FI pretty early.

Embracing minimalism in material possessions and reading about the 3-fund in the boglehead guide to investing are some of the best things I have done for my personal life this decade.

khadijahchi
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Re: Forbes: https://www.forbes.com/sites/josephcoughlin/2018/06/11/millennials-arent-having-kids-heres-why-thats-a-probl

Post by khadijahchi » Wed Jun 13, 2018 10:34 am

Grt2bOutdoors wrote:
Tue Jun 12, 2018 8:23 pm
Assume the homeowner has no mortgage, what relevance does property taxes have on housing costs? You have to live somewhere, either you pay taxes or you pay rent there is no escaping cost.

In life you learn to compromise. You don’t like wells, you don’t like septic systems. Have you searched for what you like and more importantly, can you afford it?
I live in Chicago. The real estate taxes in surrounding suburbs are over the cost of my rent in the city. RE prices are higher in the city but taxes are *slightly* lower. All in all, it doesn't make sense to live in the burbs as an empty nester even if you have no mortgage.

I know the 'estate' houses they are so tacky now, its mind boggling how much the owners want for them.

cherijoh
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Re: Forbes: Millennials Aren't Having Kids Heres Why That's a Problem for Baby Boomer Real Estate and Retirement

Post by cherijoh » Wed Jun 13, 2018 10:54 am

FireProof wrote:
Wed Jun 13, 2018 4:30 am
I don't buy the idea that young people today will "mature" some day and discover their love of cul-de-sacs and two-car garages.

Cities today are just objectively a much better place to live today than they were in the 70s and 80s, when Boomers were buying their McMansions. Crime rates of all types have absolutely plummeted. Another thing is that integration and immigration don't scare Millenials nearly as much, because a lot of them are themselves minorities. In conjunction with this, downtowns have become much more interesting, vibrant places. Even if the tastes of Millenials were exactly the same as of previous generations, the VALUE proposition is totally different.

Which isn't to say that many of them won't be forced there by astronomical housing prices.
You are absolutely correct about the value prop being different. Charlotte has a very small area of high population density relative to most other cities of the same population. The inner ring of suburbs date back to the early 20th century when a trolley made them accessible to downtown. In the 70s, some of these areas were being labeled as "urban blight" with boarded-up buildings and drug dealers on every corner. Then gentrification got started and these are now the hottest neighborhoods to live. In addition, several industrial neighborhoods have been transformed by the addition of a light rail line in 2007. Every time I go to that area another apartment complex is springing up. Residents of these apartments are just a 5-10 minute commute to their jobs without needing to take the car out of the parking garage - if they even have one. The introduction of Uber and Lyft made this urban transformation even easier.

On the other hand, baby boomers have been moving further and further out of the city to capture cheaper land on which to build their McMansions. I know several people who fit the description that the OP describes - they think that they will be able to tap home equity to fund their retirement when they retire and downsize. But that is predicated on there continuing to be a high demand for houses with 3500+ sq. ft. and 1+ hour commutes to jobs in uptown Charlotte.

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