Posted on 08/15/2017 6:42:18 AM PDT by Lorianne
Older Americans own half of the houses in the market. Many are simply refusing to sell and others have adult “kids” moving back in since they can’t afford a place to rent or buy. It is a Catch 22 and many people are looking at countries like Italy where the number of adults that live at home is enormous. Multi-generational families just don’t coincide with the “rugged American” worldview where you go out on your own and you make it with your own two hands. Of course, many house humpers had mom and dad chip in but that doesn’t make for such a sexy story. In the end, however there are many baby boomers that simply are not selling. This is actually an interesting problem that is not going away.
Refusing to sell
Housing used to be a young person’s game. The U.S. housing market and to a large extent, the economy was driven by home buying and big ticket purchases. But that has definitely changed since the housing market imploded with the 2000s. It has also changed in terms of people marrying later, having fewer kids, and basically preferring to live in city centers versus suburbs. In other words, not a big need for McMansions.
The oldies but goodies are now occupying a larger share of housing:
Over half of homeowners in the U.S. are now 55 and older. And this figure is only going to grow over time. In places like California, the Taco Tuesday baby boomers own the housing market. This is just a fact and has kept inventory to a very low level.
But housing has gotten more expensive across all U.S. metro areas so this is a much larger trend. It has absolutely crushed the available inventory out on the market:
SNIP
Spent $29,000 on two acres overlooking the valley in ‘92. Built in ‘95 - there was a building slump in the valley in ‘95 to ‘96 so my reclaimed old growth fir package was sold for $1.00 per board foot. Rough now goes for $5.00 BF, S4S is $8.00.
Neighbors just sold a (not as nice) lot for $300,000 this summer...
I did a great deal of the work myself (skilled carpenter).
2 bedroom, 1,450 sq. ft. deck 12’ off the ground.
Things are expensive in the ‘Zone these days, Wife is a RE Broker/Owner.
Happy fun times to you in NZ!
The rain seems to have cleared the smoke - perhaps we can catch a glimpse of the Perseids after 3:00 AM...
“The average home in Denver is probably purchased around $180K,”
Are you serious? That seems incredibly low.
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Using your math, you are paying $500 a month for interest, which is tax deductable, so say it really costs you about $400. And you are paying $500 a month for your house (does that include taxes and insurance, which would bring it down to about $250 a month, or are you figuring the full $500 for principal reduction?
Now go take that $500 (or perhaps $250) and see what kind of apartment you can rent with that.
And, if you bought that house in 1989, it has probably tripled in value. If you bought it in 2008, it may, depending on where you bought it, doubled in value.
So for less than the cost of a decent apartment, you have an asset which might have been worth $100,000 when you bought it worth $200 - $300,000 today.
Since the mortgage portion is loaded on the front end (your last payment would be almost all principal, the first payment almost all mortgage) You’ve probably milked most of the tax benefit out of the property if half and half on the p & i. If the taxes and insurance are coming out of the non-interest portion, then you probably should let it ride some more.
On the other hand, if you are living in a $250 - $500 a month apartment, you are building no equity, may not be in a position to itemize (unless you give heavily to your church), and you have to worry about your neighbors.
For most folks, the formula that makes the most sense is a 30 year mortgage than you pay off in 15, and from which you get 8-10 years of tax deductions. Then at the 15 years you own an appreciated property (real estate has certainly outperformed gold or oil over the last decade) with the only burdens being taxes and insurance. (And on the insurance, since you no longer have a mortgage, you can assume the level of risk with which you feel comfortable.)
Take as long to think about it as you need.
“how stupid the whole concept of paying a mortgage to get the tax deduction is.”
Definitely. If you must have a mortgage, that’s one thing. Bur if you can purchase outright, why wouldn’t you?
We are finally going back to the millennial old concept of multigenerational families living together. Now my son just bought a place and is living there. But when he marries and is starting a family, he gets my house and I get the wonderful roomy suite addition. And my brother gets the other living quarters a little in-law that I built for him.
That makes much more sense——thanks for the link.
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“liquor stores”
I kind of tripped over that. Not on my list of attractive neighborhood features.
"Older Americans own half of the houses in the market. Many are simply refusing to sell..." gee, there i go thinking of myself again...
You are ignorant. Probably a boomer. I guess your resume says how many abortions you’ve had. That was in 1973 when you free lovers screwed everything in sight. Sorry the truth stung.
Anybody having free sex in 1973 contributed to abortion becoming the law.
Let me guess... you were a toddler at that time.
>> Housing shortage is NOT based on the gray hairs not selling
The trend is no doubt related to the economic instability that plagued the Country for the last 10 years.
We property owners benefit from the sellers’ market, but ultimately we want the young ones to establish personal property investments.
In California it’s due to the millions of foreign nationals, legal and illegal, who have flooded into this state.
So where are they supposed to go?
I am making a paying off your mortgage vs. perpetually refinancing your mortgage for the purpose of the tax deduction.
“You are ignorant. Probably a boomer. I guess your resume says how many abortions you’ve had. That was in 1973 when you free lovers screwed everything in sight. Sorry the truth stung.”
You are one sad dude.
Well, on that we would agree.
Excellent except of course if your investment declines by 30%. The ability to live in a home that is owned free & clear won’t decline...at least not for financial reasons.
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