Because that's how the system was built. Sure, tear said system down. But there will be consequences. You'll see consumption and tax revenues drop through the floor. You've got millions of homeowners 50+ who are expecting to use that asset value to live on, and that will need to come from somewhere else then (most likely social security and medicare topped up from federal tax receipts).
We're just arguing over how we squeeze the ballon; the size of the ballon stays the same (for the most part).
"The Baby Boom generation possesses enormous home equity, which by some estimates exceeds $6 trillion. Despite this mountain of housing wealth, many Boomers will face financial insecurity in retirement. According to one study, between 30 and 40 percent of Boomers will have insufficient income at age 70 to adequately replace their pre-retirement earnings. The extent to which Boomers and preceding generations might be able to draw upon their housing wealth to enhance financial security in retirement hinges on multiple factors, including:
* the amount of home equity that older adults of different socioeconomic subgroups hold today and will likely hold in the future
* seniors’ willingness to tap housing assets in retirement
* the barriers that older adults might face in extracting home equity to finance retirement spending."
"For most households, a majority of their wealth derives from owning a primary residence, and the authors find that the proportion of households aged 65 and over who own their homes has held up quite well despite the housing bust and subsequent homeownership decline. Whereas the overall homeownership rate has fallen to multi-decade lows in the wake of the housing crisis, the proportion of older adults who owned their primary residence was 78.2 percent in 2012, slightly higher than it was in 1998 or at the peak of the housing bubble in 2006."
> ... You've got millions of homeowners 50+ who are expecting to use that asset value to live on...
Wealth and cash flow are two very different things. I can't tell you what the future holds for sure, but a few things.
If they have significant equity in their home, chances are good that they have significant equity in other places as well. I don't have data to back this up, with the exception of my role on the board of a my employer's 457b plan.
Timing, more than anything, has more to say on any matter in retirement that we give credit. One doesn't know when cancer hits. One doesn't know when COPD hits, and you have to move to Arizona. One doesn't get to pick when the market bottoms or tops.
Housing is a lousy investment from a purely numbers point of view. I became an owner very reluctantly and it has cost me dearly. Taxes have gone up 15% every year. While they house ages it breaks and I am on the hook for everything. $75 in weed/bug stuff today... next week it will be something else, and the week after. I've spent multi-thousands on this thing outside of mortgage that I will never recoup... also time and it pisses me off.
My sweat equity will never be recaptured, really. I am only 36 once, and I spent a good three months last year remodeling a bathroom (due to mold) and missed a ton of good run days, time with family. BUT I saved a bunch of money doing it myself!!!! Don't care, laying tile sucks ass. never again.
I can't wait until home ownership becomes a relic of the past.
Housing is a lousy investment from a purely numbers point of view. I became an owner very reluctantly and it has cost me dearly. Taxes have gone up 15% every year. While they house ages it breaks and I am on the hook for everything. $75 in weed/bug stuff today... next week it will be something else, and the week after. I've spent multi-thousands on this thing outside of mortgage that I will never recoup... also time and it pisses me off.
Whatever makes you think you don't pay for those things when you rent? Sure, rent can be cheap if the landlord considers it "free money" while waiting for the property to increase in value, but if home ownership becomes a relic of the past, you can be damn sure rents will be more than enough to cover taxes, bug sprays and every other expense, plus some margin.
In Germany, rentals tend to be for much longer terms and allow much customization - so much so, my brother had to negotiate hard to get a kitchen left in his house when he lived there for a few years, as the previous tenants wanted to take it with them!
The price of housing will fall greatly when the baby boomers begin to die off, its going to turn the market upside down when it happens. This generational handover will look nothing like any that has come before because of its magnitude and the relative paucity of non real estate assets a majority of the boomers possess.
I disagree, but you're entitled to your opinion. There's enough buyers out there to soak up real estate inventory boomers will want to unload. Millenials are screwed but foreign buyers will do fine.
You can't count on foreigners for this sort of thing. Even in liberal Vancouver they're lowering house prices by slapping a tax increase on foreign purchases.
It does seem likely millennials get screwed in any outcome but what else is new, the savvy ones already account for that.
According to one study, between 30 and 40 percent of Boomers will have insufficient income at age 70 to adequately replace their pre-retirement earnings.
Aren't expenses lower in retirement? I can imagine these people being in trouble if they can't get, say, 70% of their pre-retirement income. Even in that case, they will be fine if they deflate their lifestyle accordingly.
Seriously, the area a house is built on is a limited resource. In the US not so limited in theory but in practice quite limited due to building permits and limited availability of working infrastructure (good schools are financed by local affluent clusters). This allows claims on location to act as a store of wealth similar to currency (issued in moderation) or bitcoins (minted in moderation) particularly as long as the population seeking housing grows.
Japan is a very different place due to much more flexible building permit system, an ubiquitous infrastructure, a shrinking population and a confidence bursting bust in the past.
Both situations are sort of mostly stable. An issue in the US is that the housing prices have disconnected from income through labor. What makes this really a problem is that housing is not the only asset where appreciation has disconnected. When this corrects the question is whether it simply corrects or whether the correction follows the path Japan has taken in the past. There are more people in the US but there is also vastly more land and Japan has shown that a society can change its mind about real estate as an asset.
Ask the people who shafted every other form of retirement savings?
This is the case in the UK; the government and industry have systematically dismantled both the state and private pension schemes for the vast majority of the people. Interest rates are held low, the stock market is incredibly volatile. Now they are coming after the one asset that people have left. Of course people are upset about that.
Why should it be an asset in the first place?