Thursday, February 26, 2009

Many baby-boomers are underwater on their homes

The Center for Economic and Policy Research reports the poor state of Americans nearing retirement:
According to a report released Wednesday, the real estate market bust and stock market declines have carved a huge chunk out of the assets of baby boomers, the largest age cohort in U.S. history.

So much home equity has been lost that should boomers need to sell their homes, 30% of those aged 45 to 54 would owe money at closing, according to "The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble," a report released by the Center for Economic and Policy Research, a Washington, D.C.-based, non-partisan think tank. About 18% of boomers aged 55 to 64 are underwater and would have to bring money to the table.

The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners. That's true for all five wealth groups the study analyzed, from the poorest to the wealthiest.

"The collapse of the housing bubble, which led to the current recession, has already destroyed almost $6 trillion dollars in housing wealth for homeowners," said report co-author Dean Baker. "This reality is compounded by the recent collapse of the stock market. Many baby boomers will only have Social Security and Medicare to rely on in their retirement."

Boomers between 45 and 54 have lost 45% of their median net worth, leaving them with just $80,000 in net worth, including home equity, according to the report.

Older boomers have fared marginally better. Those between 55 and 64 have lost 38% of their net worth, leaving them with $140,000. But this group is rapidly nearing retirement age and they have few working years left to make up the losses.

30 comments:

  1. Alexandria (click here for map) might the exception that proves the rule.

    Referring to the map.

    BRAC, the Base Realignment is moving thousands of jobs to Alexandria's zone 1. This was announced mid year 2008.

    Alexandria City is pushing for an infill Metro station in zone 11, the future Potomac Yards station. This is in the planning stage and was just announced this month.

    Who benefits? Zone 10 (Del Ray) and zone 7 (North Ridge).

    This doesn't guarantee anything but anyone satisfied with their home and lifestyle in zones 10 or 7, would be silly to sell and move to, er, Manassas.

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  2. As a former Harford County resident, I can tell you BRAC is more of a local politicians’ hoopla than anything. When it was first announced that Ft. Mammoth of NJ would close down and the jobs would move to APG in Harford County, members of the county council let loose unmitigated glee like as if they were Yosemite Sam on ecstasy. The first number I heard was 20,000 or more people with high paying (six figures) government jobs were coming and they would support an additional 30,000 service-oriented jobs for Harford County. Get ready because Harford County was going to explode!

    Now, about 7,000 jobs are coming but more than 2,000 jobs are leaving APG. And in the fall when I picked up the local paper, The Aegis, there was an Op-ed piece asking where all the people were. I don’t remember the specific details and I couldn’t find the article, but an Army official had stated that at the time, the transition was already halfway through. Apparently no one had noticed.

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  3. The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners.

    Oh man - that is awesome! I remember just a few years ago when the common insult hurled by the idiots on Craigslist at those not willing to join the greater fools club was that the average (or maybe median) net worth for renters was only $4K. (Talk about getting caused and effect way wrong.) Could it already be less than that for the median homeowner?

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  4. Big whoop on this study. So people closer to the retirement finish line are in more trouble than a 30-something?

    And it took a study to tell me that?

    This is bad news, of course, but for the younger generation. It means that retirement age workers will likely stay in the job market longer.

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  5. Hmmm - I just got an appraisal for my place in the immunozone (I refinanced out of my Interest Only loan). It says my house is worth $195,571.00 more than what I paid for it in 2004.

    Maybe I sell today, and pocket the 100K, or maybe I continue to sleep soundly, knowing (3 years after I was told I was doomed) I am still way up. Thank god I acted irresponsibly.

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  6. Frankly I wouldn't mind some of those rich fucks out in places like Palm Desert and Palm Springs to lose their money....arrogant, self-righteous gits.

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  7. I just got an appraisal for my place in the immunozone (I refinanced out of my Interest Only loan). It says my house is worth $195,571.00 less than what I paid for it in 2004.

    That aint right, I deserve the dream. i did nothing wrong.

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  8. Your a liar anonymous.

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  9. Such hostility! If it makes you feel any better - I am pretty sure I lost at least 30K since the peak...

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  10. I'm a doctor who is a happy renter with $200k saved for a down payment. I laughed at all the "all renters have a net worth of $4k" comments on Craigslist. I'll stay on the sidelines for another year or two before buying a home on the cheap. Too bad for the boomers! No tears shed here.

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  11. "Too bad for the boomers! No tears shed here."

    I'm a renter and a 30-something BUT the sooner we realize that we are all in this together, the better off we will be. Boomers having less money has ramifications that impact everyone, including those coming up who want to fill the jobs that the Boomers currently are in? There are many more ramifications (i.e., less boomer money means less purchases, etc., etc.)

    Anonymous -- Glad your house appraised for more than you bought it for. You're lucky, not a genius so don't gloat too much.

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  12. "You're lucky, not a genius so don't gloat too much."

    Point taken. I really had no idea I was looking in the 5-10% of the metro area that was not going to have crashing prices. There was no "welcome to the immunozone" sign as I drove around with the realtor. Better lucky than good I guess.

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  13. "I'm a renter and a 30-something BUT the sooner we realize that we are all in this together"

    meh f'em. You can be "in this together", but Im not. If things get bad enough where people like me lose jobs, Im outta here, cause Im not tied down to anything underwater.

    Just like the doc above, I have a huge amount of liquid cash and zero debt. I only make $110K a year, but I live really modestly. I might buy in a year or two, we will see.

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  14. "I'm a doctor who is a happy renter"

    I'm a lawyer who sues doctors and typically wins.

    What's that again? You say you have a lot of cash on hand?

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  15. "I'm a lawyer who sues doctors"

    I'm a nuclear physicist with more money than you'll ever have.

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  16. Im not a doctor but I play one on the internet.

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  17. I'm a doctor who pumps and dumps female lawyers. So easy.

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  18. In any case its not so much about the Boomers as it is about the middle class....you can kiss them goodbye!

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  19. I was born rich and have no need to work whatsoever. (Although I do)

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  20. thank you for the information. the data helped a lot in accessing the status of the middle class.

    more power!

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  21. Im a guy laughing at all the baby boomers who sucked the equity out of their house, which I will be buying for 50% off. Thanks for putting in the granite counter tops and new stainless steal appliances!!!

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  22. Anonymous said...
    BRAC, the Base Realignment is moving thousands of jobs to Alexandria's zone 1. This was announced mid year 2008.


    Super. What’s missing here is the median income it will bring. If you have XXX people moving in, and those incomes only support a ~$200K home…….any guesses on what the median home price will be?

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  23. "If you have XXX people moving in, and those incomes only support a ~$200K home…….any guesses on what the median home price will be?"

    Unfortunately, they will not be able to afford a home and many will turn to rent. Likely they will just support rents more than anything. Alexandria is over 50% renters now, I expect it to become more so.

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  24. "Alexandria is over 50% renters now, I expect it to become more so."

    Its a shame rent is barely even 1/3rd a mortgage payment though.

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  25. "No tears shed here."

    The younger generations are so lucky to have such compassionate doctors at hand like you. If that thinking represents the new social contract of the upcoming elite classes, the youth from other classes will realize that the real enemy is not generational.

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  26. "The younger generations are so lucky to have such compassionate doctors at hand like you."

    Just up front, Im not the "doctor"...

    but sh*t man, who are you trying to kid?

    You suck every red penny of equity out of your house, that tripled in value in just 5 short years, to buy nonsense...and you expect everyone to have compassion for you when its time to pay the piper????

    Baby boomers and their self righteous, entitled, apathetic, pathetic generation is what got us here. I have more respect for a "compassionless" doctor than I do for a 50 year old moron that expects tax money to bail him out. So get off your high horse.

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  27. forgot to sign my post....

    sincerly,
    generation f*ck'd (thanks to people we should have compassion for)

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  28. Seriously..ANON Doc is right....fk the baby boomers. One trip to Palm Desert and all that compassion that other ANON wants is out the door believe me.

    I sincerely hope a single cent doesn't go to these self-righteous bastards. I do hope the people who truly need help get it...but the ones who lost money taking big risks and being greedy?

    Is that OTHER ANON serious? So what now? Want your money back from a casino because you lost your shirt?

    Indeed. Thanks to the last baby boomer generation, we now can't afford a home comfortably and on top of that, we need to bail out the last fkers who caused this.

    Screw that shit.

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  29. This started in 1918 when the Federal Reserve started printing money like mad and was fed more fuel in the 70's when Nixon took the USA off the gold standard. The FED pumps up the money supply, creates a bubble and the rich folks win and the rest of us lose, no matter what our age.

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  30. Not really. It all started when the baby boomers sucked all the equity out of their homes the moment their homes tripled in value in a short 2 years.

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