Posted on 02/12/2023 2:18:40 PM PST by nickcarraway
In 1988, a newly married Fiona Emery and her husband bought a flat in the Melbourne suburb of Newport for $65,000.
Key points:
Fiona Emery and her husband bought their first property for $65,000
The Reserve Bank of Australia increased interest rates for the ninth time in a row this week
A finance academic says a recession is a possibility for Australia
When they returned from their honeymoon, interest rates had reached 17 per cent.
"We had no money, no savings, we were so young," Ms Emery said.
Three decades later, and a few moves in between, Ms Emery now lives in a Ballarat home with what she described as a "small mortgage".
The teacher said it was a very different story for her three children, aged between 19 and 27 years.
"I feel for them … the world was very different then to now.
"Buying a house will be much tougher for them ... I think we had it better in the late 80s."
Ms Emery pointed out that the value of the first property she bought was roughly 1.5 times the combined annual income of her and her husband.
"For my son to buy a 'reno-delight' in Ballarat, he'd probably have to spend about 4.5 times his income," she said.
As for the criticism levelled at millennials and Generation Z by some of their elders, Ms Emery said it was not fair to compare the different generations — a sentiment echoed by several economists.
"I try not to say, 'Back in my day...' to my kids," she said.
Recession possible, finance academic says
Regardless of generation, the Reserve Bank of Australia (RBA)'s latest interest rates hike will do little to lift the spirits of anyone staring down increased mortgage repayments.
Adding salt to the wound is the possibility of the dreaded "R" word becoming a reality for Australia, according to Deakin Business School Behavioural Finance Academic Erica Hall.
"The RBA is walking a tight-rope at the moment and they want to get inflation down... but it's at this inflection point where you don't want to overshoot and end up in a recession," she said.
A sign saying "Reserve Bank of Australia" on the exterior wall of the RBA's Sydney headquarters On Febuary 7, 2023, the RBA increased interest rates for the ninth time in a row. (ABC News: Daniel Irvine) What was "for sure", Ms Hall said, were further interest rates hikes.
"I would say, though, that we're closer to the top of the tightening cycle than the bottom," she said.
With that in mind, Ms Hall said it was a good move to direct discretionary funds into extra mortgage re-payments if possible.
"Just have a buffer so that in case something does go awry, as much as we do want economies to tick over, we also want to make sure we can keep a roof over our heads," she said.
On the matter of discretionary spending, Ms Hall said regional tourism operators may benefit from holiday-makers choosing to ditch international travel and the costly strings attached.
"Maybe people will go domestically instead because it might be more cost-effective," she said.
"You're not going to have to pay for airfares, worry about currency exchange rates. But there are many moving parts, and each individual's situation is going to be a bit different."
Again, this is something you really can hang on Reagan and what was standard right wing economic thinking in the 1970s-2000s: free trade, deregulation, abolition of pensions for DC plans, etc. I’m a bit more neutral as everything has its trade offs.
it’s come to this...
What is a generational mortgage?
Sharing a mortgage between two or more family generations may bring home affordability within reach but may also come with other substantial perks for all involved: Pool resources for a bigger down payment to get a conventional mortgage (no insurance premiums)Jun 24, 2022
Multigenerational Mortgages
Democrats controlled the House and lawmaking from ‘55 to ‘93.
Reagan was just the Executive. He didn’t write laws.
I think in Toronto, they offer 40 year mortgages.
“So we got 15 years of no growth. “
Dow doubled plus dividends
I’m doing fine and I’m not envious.
I’m tired of Boomers who think their shit doesn’t stink.
I served in the military and used my GI Bill to go to university.
I make six figures in a recession proof industry.
I have concern for the future of my countrymen.
That’s a problem here, selfish pricks who got theirs.
Your decision, investment wise, was just luck.
Thinking you were smarter than all those MBAs with decades of experience means nothing.
It was a hold or sell option, it worked out, and hindsight pats you on the back.
It’s a common fallacy in investing.
age based???
It took other countries decades to get back on their feet. What we started doing in the 90s though with refusing to seal the border and outsourcing our manufacturing to China and a lot of the rest of the 3rd world really gutted the middle class. If we reversed course, brought a lot of manufacturing back, sealed the border and deported millions of illegal aliens there would be fewer people to buy houses and companies would have to pay more in wages for Americans
By the 1970s we were a sorry mess because the rest of the world was back on its feet and had exposed our flaws badly.
The 1980s saw a resurgence that was driven largely by the deregulation of three key industries: trucking, railroads, and telecommunications.
I think it’s been mostly downhill since then, with ever-growing parts of our economy built on costly government mandates and fascist government-business practices.
Are you kidding? Home building in central Florida is exploding. Right around my community, we are getting at least 25,000 homes built in the next year or so. In fact, they’ve leveled the land all around us. It’s going to be crazy! But that’s what happens when you live in the best state in the country!
He just signed them. He especially loved amnesty. One of his favorite. I am stumped on why people think he was to great. I was 8 when he was elected so I don’t know much about him but he sure was liberal in his bills.
get a college degree - still needed and possible, and with good enough test scores you can easily get merit scholarships, or if needed, needs based ones.
get hired by a big company like IBM - you can still do this and start earning $100K straight out of college if you get a degree in something worthwhile like engineering or computer science and not women studies.
rise up through the ranks - easy to do, maybe easier than ever since no one actually wants to work anymore.
get that sweet pension - today you would get sweet stock options and 401K matching.
Buy a cheap house which soars in value - you can still buy cheap houses, just not in the city, you have to buy them in the country the same as your grandparents did. Those homes they bought that “soared” in value did so because the cities grew massively and swallowed up the cheap rural areas our grandparents built their homes in. This is what made them soar in value. But everyone today wants to buy in the brand new subdivisions or worse yet in the hip inner city highrises.
retire to Florida with millions in your portfolio - can still do that today with the stock options and 401K you collected along the way.
and a steady on-going income for life - see above.
Things are hard if you make them hard. If you choose to go to an over priced college vs a cheap one, if you get a useless degree instead of a useful one, if you buy in an expensive area verses the country ect
Your post sums up nicely why Gen X on down have a grudge against Boomers. There are a lot of Boomers who get it, but there are even more who simply can’t understand why the later generations haven’t arrived at the same level of contentment they did. Golly, it must be laziness or something.
We bought our first home in 1986. The cost was $69,000.00 this was in Ocean County NJ. We held that home for 19 years, did 2 refinances. We sold the place for almost twice what we paid for it but owed $54K
We moved to PA 2004 bought in a low COL area, a nice but modest place with a few acres. Paid off our mortgage in January 2018 18 months early.
When I add up the total amount of interest we have paid for the 2 homes, that amount is equal to the current market value of our paid off home, almost to the penny. That is just the interest not the principle and other costs of the home.
We love our house and we are thrilled to own it free and clear. It has to be said that home ownership is not inexpensive and primary real estate is actually a poor investment. As an asset it is only an asset when you sell it at a profit.
With a paid off mortgage we need to determine the amount of principle paid, add that to the interest and then subtract the amount of rent or a reasonable amount of shelter costs over the years to determine how much exactly the home costs us.
I calculate that we pay off our bank payments and purchase costs on our real estate minus costs will be in 2025 that is about 39 years. This is a rough estimate and doesn’t factor taxes, renovations and repairs or quality of life. Granted a paid off home in retirement will on average make it easier to live a certain lifestyle and makes housing costs somewhat easy to plan for. We all need a roof over our heads and owning our home makes that a lot more pleasant over renting.
Still, primary real estate is a poor investment all things considered. This is why buying less not more of a home is a wise thing to do. Buying at the top of what you can afford causes stress in many cases. The best thing young people today can do for themselves is stay out of consumer debt, save money, put a large downpayment on a modest home and get rid of the mortgage as soon as possible. I know there are many arguments pro/con on paying off the home early but even on a low interest mortgage the high principle causes a lot of interest.
I also think the government traditionally wanted Americans to own their homes so as to reduce the number of people in need of soviet style public housing. Those days are long gone, it was never intended for the average American to own income property so our government is doing everything it can to get the average Joe out of the landlord business.
They weren’t ‘his’ bills they were Tip O’Neil’s and the Democratic Houses’ bills. He vetoed many and shut down the government several times on budget disputes. If you weren’t paying attention you wouldn’t notice the constant acrimony he had to deal with from the Democrats and Leftist media.
His biggest flaw imo was the massive defense budges meant to spend the Soviets into the ground. That and his opposition to communism greatly contributed to the collapse of the Soviet Union. No one believed in it anymore. The coal miners stopped working and that was the beginning of the end. The whole fraudulent system collapsed. Reagan showed how well capitalism could work so no one believed in Marxism Leninism any more.
It was a coalition of conservative Democrats and Republicans along with prodding by Reagan that led the push for economic liberalization and free trade. Again, the policies of the Reagan/Bush/Clinton area on deregulation, liberalization and free trade had their positives and negatives.
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