Why do so many young adults live at home? A record 34.5 percent of Millennials live at home with their parents in California.

A record 34.5 percent of Millennials live at home with their parents in California.  This rate is higher than the national rate of 30.3 percent which is already incredibly high.  There is ample evidence suggesting that Millennials simply do not want the same things as their Taco Tuesday baby boomer parents.  And many simply don’t want the McMansion aspiration since many are going to have small families.  This is an interesting shift.  Boomers are trying to off load larger crap shacks to an audience that is more interested in smaller more centrally accessible properties.  In California, those young adults that aren’t living at home are likely living in a rental and paying close to half their income on housing.  Good luck saving that 20 percent down payment on a $700,000 crap shack (or $1 million crap shack in the Bay Area).  So why do so many young adults live at home if the recession ended in 2009, more than half-a-decade ago?

Young adults living at home

It should come as no surprise that there are a record number of young adults living at home.  A Fed study found that one major reason stems from younger Americans having massive debt, largely in the form of student debt.  The latest figures show student debt outstanding at $1.3 trillion.  This is an increase of $1 trillion in the last decade or so.  So many young adults are starting life with a mini mortgage already.

Let us look at the changing trends here:

living at home with a parent

Source:  Census

In 2000, only 24.6 percent of those age 18 to 34 were living at home with a parent in California.  That number has increased by nearly 10 percent to 34.5 percent today.  Why this is significant is this is the age range when households begin to form.  Keep in mind this is household formation meaning buying and renting.  Not only is it hard for young people to buy a home in California but many are confronting the rental Apocalypse head-on.

It is expensive to purchase a home when your income isn’t keeping up as well:

median earnings

Inflation adjusted income for Millennials is down and household costs are up big time.  In California, housing prices are driven up by investors, foreign buyers, and a large dose of NIMBYism.  So many young Californians are left living at home deep into young adulthood.

Usually the urgent house humping rush to buy comes from adding members to your household.  Yet the size of the American family has been shrinking dramatically.  All logic is tossed aside when there is this sudden urge to nest.  I get countless emails from those with little babies or people that are pregnant that suddenly “need” a bigger home.  Screw planning for retirement, we need a crap shack now!  But overall, there is less pressure from Millennials because many are waiting to get married:

never married

In 1980, 44.6 percent of those age 18 to 34 were never married.  In other words, the majority in this age group was already married.  Today, 68.8 percent in this age group have never married.  That is a dramatic shift in household dynamics.  And once married, how many kids will these couples have?  It is interesting that the larger baby boomer homes are serving their purpose as their adult kids come back and live at home.

And this also impacts the retirement situation for these boomers.  Many will try to help their kids to purchase a home so there goes a big chunk of money.  Many don’t have this money so simply allow their kids to stay at home keeping them from actually selling their property to downsize.  What is abundantly clear is that the Millennial age group is having a tough time buying homes in California.  California actually leads the nation with young adults living at home.

But you want a starter home you say.  Here is a starter home for you:

starter home

706 N Madison Ave,

Los Angeles, CA 90029

1 bed with 400 square feet

Let us look at the ad on this starter home:

“Great starter home! This is a fixer upper but full of possibilities for the creative type! Close to LA City College, shopping, fwy access and downtown L.A. Property is being sold in its current “As Is” condition. Great opportunity for investors: property is in RD1.51XL zoning!”

This place will only cost you $409,000 and is full of “possibilities” as the ad says.  The current tax assessment is based on a value of $49,680 so gear up to pay 10 times the amount of annual taxes as the current owner.  This is thanks to California NIMBYism like thinking.  And you wonder why the young in California are living at home in record numbers.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.






164 Responses to “Why do so many young adults live at home? A record 34.5 percent of Millennials live at home with their parents in California.”

  • Alex in San jose

    How many can afford $1000 a month or more to live in a hole in the wall?

    Better to stay home and save money.

    • Paul - ( not a Realtor )

      Let’s face it – we have not provided the needed careers and pathways for our young adults to make enough income for today and then for later years. As a result they know they cannot afford to buy a house, not even a condo. Paying sky high rent means that the young adults cannot SAVE money for their future .. or even for the unexpected emergency. ALL TO THE CREDIT OF THE WALL STREET FRAUDSTERS THAT RUINED THE ECONOMY ..and… TO THE CREDIT OF THE LARCENOUS REAL ESTATE INDUSTRY (i.e. Agents,Brokers,Bank Loan Mortgagors, Escrow people) — WHO ONLY CARE ABOUT THEIR COMMISSIONS, KICK BACKS and BRIBES … ALL MADE POSSIBLE BY THEIR NEVER ENDING “LIES” and GREED. ( ** One day they will all PAY DEARLY for their CRIMES !!! ** ).

      • Alex in San jose

        Amen! We have huge income inequality now in the USA. The average worker can’t afford a standard residence. We really need workers’ barracks and SROs and rooming houses but the RE industry only caters to the upper middle class and to them, everyone else can just sleep under a bridge.

      • “One day they will pay for their crimes”.

        Sorry pal, but that one day will never come. Intrinsically we believe that somehow or someway bad deeds will “one day” be punished and the good deeds will be rewarded. I guess that is human nature to think that good always wins out against evil. But that is not how the real world works.

        No one got punished during the last financial crisis and no one will be punished in the next ensuing financial crisis.

      • son of a landlord

        Alex: We have huge income inequality now in the USA. The average worker can’t afford a standard residence.

        As others have observed, that’s not true. The “average worker” in the USA can afford a standard residence. It’s only average workers in a few bubble cities that cannot.

        Can’t afford L.A.? You can always move.

      • @Nimesh “No one got punished during the last financial crisis and no one will be punished in the next ensuing financial crisis.”
        Let’s not say ‘no one’. At least Iceland is making an attempt to actually hold those (locally) accountable that sent their country into a downward spiral. Here, at least in terms of Wall Street, those that caused the problems with the exceptions of a few scape goats, still have their high paying jobs and will never be prosecuted.

      • RE Industry cater to upper middle class in large part because thats where the profit is. Government (federal and state) own a ton of land which is left fallow and private owners know this and want their pound of flesh for their postage stamp sized lots. In addition to that is the government mandated fees (bribes) required to get anything built today and all that makes it difficult to build and get a profit for lower to middle income housing. Thats why you haven’t seen much of that in many years. You will instead see “worker housing” built via government/private industry partnerships where a development company as a condition of developing a tract for the upper middle class must build units for the worker bees. Pols love it because its buying votes of the poor, and they get big campaign contributions from the developers.

      • Alex in San jose

        Son – In my experience, in this bubble, rents are about the same everywhere, especially when you take pay rates into account.

      • son of a landlord

        Junior Bastiat: You will instead see “worker housing” built via government/private industry partnerships where a development company as a condition of developing a tract for the upper middle class must build units for the worker bees. Pols love it because its buying votes of the poor, and they get big campaign contributions from the developers.

        That’s exactly what’s been happening in Santa Monica for some 20 years. The city has imposed severe zoning restrictions on new construction — restrictions on height, size, use, parking spaces, etc. — all of which make it difficult to build profitably.

        But these restrictions can be negotiated away, if the builder provides “community benefits.” This most often means that some apartments in the new building will be reserved for “low income” renters, paying below-market rates.

        Other “community benefits” might include easements for bike paths, bicycle parking spaces, “environmental offset payments” to mitigate harm to the environment or increased road use (i.e., bribes to the city), community rooms, etc.

        There are many new buildings going up in Santa Monica. Many are far larger and taller than zoning would normally permit. Each contains “worker bee” apartments for “low income” tenants, and other “community benefits.” Naturally, the market-rate apartments and condos and retail spaces must command especially high prices, to pay for all those “community benefits.”

      • son of a landlord
        November 2, 2015 at 10:46 am
        Can’t afford L.A.? You can always move.
        ————
        To be perfectly clear and blunt: you don’t know what you’re talking about.

        The areas that are cheap or at least cheaper right now have terrible job markets that are very clique-ish and are usually sewn up by the locals making it tough to break in. Even then once you do the wages are usually lower to “adjust” for the lower cost of living. On top of that moving is expensive, especially if you have to go out of state.

        I actually moved out of CA a few years ago so I know what it takes to pull it off and its damn hard. Lots of other people coming into this state too from CA and they’re often out of work for the better part of a year, burning up all their savings, and then when they can get a job it pays $9/hr. And while the cost of living is indeed much lower than CA here $9/hr is only livable if you have 2-3 room mates and no family with you. Many of the Californians that are moving here are getting ready to retire, or were, and so have little to no options to change careers and retrain.

        Even if they did there is little to change to or retrain to here. Many of the locals actually work out of state! They’re only home half of the year! Or they work 2-3 low paying jobs to scrape by. They can’t even afford to go to the movie theater more than twice a year.

    • a one bedroom apartment in socal is about $1400 a month is a so so neighborhood

      • a friend of mine pays $1200 a month for a one bedroom in the heart of torrance west of madrona or prairie if you prefer

      • Alex in San jose

        Aaaaand….. It’s gonna a be the same in Prescott, Arizona, or Colorado Springs, Colorado, or well choose anywhere. If it’s actually cheaper in dollars, your lower pay will make the ratio worse.

      • I’ve said it before but its worth repeating – I pay 1K/mo for a 2bd/1ba house on .2 acre and its less than 10% of my gross income. It can be done – you have to have the education, skills, creativity and work ethic and hunt around.

    • Schools need to start allowing children to think creatively and abstractly. Then teach about money and entrepreurism. Our education system is so crap and it is, among other things, what is fundamentally wrong with the direction this country is heading. The tax code also kills businesses. If you are self employed in this country you should be rewarded by paying a lot less taxes as an incentive.

      • I don’t disagree that kids need to be taught how to think on their own, be entrepreneurial, etc.

        But being an entrepreneur isn’t necessarily the answer. Small business formation in this country is plummeting, and it’s because running your own business is increasingly a losing proposition.

        The harsh reality we face is that opportunities are drying up everywhere.

      • Howard, you are right that school should be teaching kids to think creatively and abstractly. Any sort of problem solving thinking skills would be a welcome to many schools that are underperforming. Sadly, more and more schools are focused on self-esteem and not actual learning. Many districts (this is just the beginning) have resorted to manipulating their grading scales so more students will pass. After all, how much thinking and effort does it really take when you only need 20% to pass a class? The board actually voted 5-0 for this by the way.

        http://www.freerepublic.com/focus/f-news/3351657/posts

        School are becoming so focused on getting that 100% graduation rate and reducing the number of F’s that they would rather change the scale as opposed to how much a student actually knows. At some point, some schools will just eliminate the F because the mantra of ‘everyone is a winner’ takes more and more precedent every year. I have yet to hear of a high functioning school adopting a scale of such nonsense.

        I can’t find the original article that I read but the superintendent and board members talk about how this scale raises the bar as opposed to lowering it.

        Thank you to James Harrison for taking a stand on the fore mentioned mantra.

        http://www.msn.com/en-us/sports/other/james-harrison-took-away-his-kids-participation-trophies-because-they-didnt-earn-them/ar-BBlMqnA

        Bringing this back to housing or just money in general, these students will leave high school having very little understand as to how finances really work. Someone will convince them that they can afford a 400k home on a $15/hr Wal-Mart job which, as we all know, does not end well for them or the taxpayer when the next round of bailouts occur.

      • The tax code kills businesses? Seriously? Do you own a business?

        I’ve owned a small business since 2002. Recently, jumped to work for another company and kept my business in the background with the blessing of my new employers. Know what I did? Got hired as an independent contractor. My CPA told me to do so for tax reasons over being an employee.

        You can declare a minimum payroll salary, say $70K, and declare the rest as K1 partnership profit, so you are only paying FICA on the $70K even though you make a lot more. Then, you can shelter tens of thousands of dollars in individual retirement plans from taxes. All of this is 100% legal and it’s because the tax code is written for businesses, not individuals.

        I tell my friends this all the time. It’s a canard to say the tax code hurts businesses. The deck is stacked against the worker.

      • Alex in San jose

        HoJo – If you are self employed you get to write off a ton. You get a good accountant and you’ll pay half what a prole making half what you make pays.

  • Real Estate mogul Sam Zell sold off almost 25,000 rental units recently. These were mostly suburban low rise and mid-rise units. Retained by his company were apartments in urban centers.

    The trend maybe that urban cores are to be gentrified and the urban underclass relocated to decaying suburban rental housing. The caveat here would be that many central cities are heading for bankruptcy as a result of pension obligations. Chicago, Philadelphia, Houston and Los Angeles would be on this list.

    • Alex in San jose

      Unit – That’s how it is in urban France. The elites live in the city the more central the better, and the suburbs are for the second-rate people.

    • Makes sense what maybe going on. Pension crisis may be the next problem for the economy. No more safety nets for public services. Every man for himself now. How would homes or any properties be able to hold their value if there is no guarantee of safety nets for our public services when they retire. No way homes could maintain their values in high priced cities.

      all IMO

      • Sure glad we have a 2nd amendment. Looks like we may need to use it.

        The Progressives know this…. they NEED gun control to save their own lives…. guess who the masses will go after first?

      • Alex in San jose

        Lumberg – I’m slightly to the left of V. I. Lenin, and I think everyone ought to have guns. And training. The ideal of a “well regulated” militia was originally, practiced and sighted in. That’s right, adjusting the sight on the gun was in that time called regulating the sights.

        Cars, gasoline itself, a bunch of things are more dangerous than guns. I was reading a copy of EBONY at the barbershop today and there was an article about child safety, and it turns out the leading cause of death for very young children is drowning. Next is window falls.

        I’ve been. Shot at a few times. Only once did a bullet (I think a .22) glence off of my motorcycle helmet (which sure got my attention) but I’ve had people for all intents and purposes try to kill me with their cars.

        TL;DR: I love guns and hate cars.

      • Alex in San jose

        I MEANT LIMBERG!!!!

    • I live in Chicago and I find it very interesting how people engage in herd/group thinking behavior. When buying a home, one needs to evaluate the neighborhood and the financial status of your local city, county and state. By all measures these big cities are a financial mess. Yet the lemmings are clamoring to move in.

      Chicago just passed a record half a billion dollar property tax increase. Then after they voted for it. Not even 24 hours passed and some alderman said on news forums that “that won’t be enough, we will try our best but we may need a bigger property tax increase in the future”. I kid you not.

      If you buy in Chicago, Philadelphia, Boston, New York, etc. then you are a hostage to the city and their liberal politicians. The politicians must be happy as a clam that they get to tax the shit out of property owners.

      • @ Nimesh:
        Keep bringing it – the fact that Rauner is now lambasting Rummy the Balerina is completely justified given this enormous property tax increase. Classic liberal frothing at the mouth from Rummy making it OUR fault and not the fault of decades of liberal political spend til the cows come home.
        Check out http://www.illinoispolicy.org for further articles and details as well as the Civic Federation – Lawrence Msall – who has for years been warning that the unfunded liabilities will take this place down – and he is right.
        8 mos and I am outta here!!!

      • Please stop politicizing! You are full of hot air blaming liberals or republicans. These problems have arose with both parties in office. Both parties repealed glass steagal, turning housing into speculative gambling and insanely low interest rates was the foundation and fuel to all this. Raise interest rates please! Stop looking at housing as way to make big profits!!!

      • Which is why Im amazed every time one of these putzes on this site wants to get rid of prop 13. Prop 13 is insurance against greedy politicians.

      • Hotel California

        “Which is why Im amazed every time one of these putzes on this site wants to get rid of prop 13. Prop 13 is insurance against greedy politicians.”

        How classic. Receive a government handout and then try to convince the people paying for it by distracting them with the lie that it has forced the gatekeepers to be honest.

        The truth is that well entrenched Prop 13 beneficiaries are enjoying other tax payers carrying their weight through disproportionally higher taxes and fees for the same services.

        Prop 13 has not prevented “greedy” politicians in Sacramento. Our taxes and fees are through the roof, nearly 40 years later.

        Us putzes are growing in numbers so you’d better get used to hearing about it, lest you think looking a gift horse in the mouth is going to help your cause.

      • Alex in San jose

        Nimesh, how it works is, when all of your friends are buying houses, you feel left out if you don’t buy one. And literally, most people’s memories only go back 3 years, and for the last three years we’ve been in “recovery” and the Stock market has been going up.

      • The property tax issue in Chicago – it’s not a “Liberal” problem. Without revenue, how will things get paid for? There have been some serious bungling by Daley on a bunch of deals, but cutting out everything to avoid raising taxes only makes the city an unpleasant place to live. If that happens, people leave. Property values drop, the city blights and becomes another Detroit.

        I always hear the righties talk about lowering or cutting taxes, but always have some kind of voodoo economic plan that is vague or talks about cutting everything beneficial, like their the only ones on earth with an income while forgetting that these programs prevent people from revolting on the wealthy.

        Chicago has some serious issues with money management and Emmanuel isn’t going to solve any of them during his tenure. Granted, Chicago is a BARGAIN compared to NYC, SF or SoCal and we all pay to live where the opportunities are somehow. This fantasy of a no-cost-all-profit life isn’t gonna happen.

    • Hotel California

      This sort of article is typically a classic marker of the top.

      • I am curious why these articles show up at certain times. Who are they signaling to who in the crowds. The bankers, the Real Estate Agents, who? Plus we are approaching the winter which I assume leads to a quieter market unless… its different this time?

  • Good article Doc!

    While what you say is true, this trend is not only going to continue as is, but it is going to deteriorate significantly.

    We should thank all our globalist politicians elected left and right – literaly.

    For those very sensitive to the world “liberal”, yes Obama is a liberal and a globalist and Clinton even more so than Obama. And I don’t have a problem ONLY with “liberals” but all those RINOs like Bush, McCain and Romney who are globalists, too.

    For those who don’t see the connection between their globalist policies (more and more trade agreements) and the disapearance of the middle class, they must be blind and with no critical thinking.

    Prety soon CA will have only super rich and super poor and SoCal will look like a thirld world hole – if not already there.

    Yes, I know there will be plenty of those contradicting what I am saying, but that is not going to reverse the trend or change the truth.

    • Brilliant Flyover. You get it. The public is a just a group of useful idiots to the political parties. If you are not a CEO of a big corporation, big donor or lobbyist they don’t want to hear from you.

      Every four years the clown car comes around and the candidates pop out promising cash and prizes for us all then disappear after we’ve cast our meaningless vote.

    • So if the globalists are slowly turning planet earth into a one world government, economy, and religion what can the 99.9% sheeple do about it.

      Serious question

      • Ben,

        The answer to your question is simple – stop electing globalists. Most of the MSM is in the hands of few globalists and they always promote globalists, denigrade and mock anyone outside of the their circle from CFR and Trilateral Commission.

        Elect the one which is the most mocked – you bet s/he is from outside of the good old boys club. For starters, Clinton, Obama, Sanders, Bush and Marc Rubio are globalists.

      • Alex in San jose

        Ben – vote for Sanders

      • The hidden problem in all this I bet is the banks influence on our elected officials. Our officials are quietly being lobbied or coerced into changing policy for these groups needs. Slowly, but surely they are changing minds/traditions/beliefs to something different than what was intended. Maybe they are being told to speed things up for some purposes and slow them down for others. Either way it is a different world where money is leverage to get things done. -all imo

  • Alex in San jose

    A greater rate of marriage here in California? Well knock me over with a feather. I guess it must be the large portion of our population for which family means something.

  • The game Monopoly was specifically created to teach people what happens when the land becomes monopolized. She thought if the kids learned it at a young age they would know what NOT to do later on. For some reason this lesson has not been learned even though everyone knows what happens at the end of the game. There are actually two lessons though. Lesson number one is that most all of the players lose everything. Lesson number two is that even the winner loses because he no longer has anyone to ride his railroads or rent his properties. A third minor lesson that is written into the instructions is that if the bank runs out of money you are free to look around for any scrap pieces of paper laying around and make new money to keep the game going. Most people try to keep the game going to avoid violence. Isn’t that what the fed is doing?

    The problem with the real world is you are competing with people that have already been around the board many times and already bought everything up. You are also being overrun with foreigners who dont even know what a dollar is worth. Then even if you do get in the top 10% of earners or inherit, they tell you cant change anything and you have to pay huge tax bills. The only way to win is to not play. Move to flyover where shit is almost being given away.

    Millennials can’t afford student debt and rent. Check mate. Time to move to flyover and start over. The smart money is leaving as fast as they can.

  • californianative

    I see this first hand in my own family. A niece, now 32 years old, not married, splits her time between her parents home and living with her boyfriend ( who lives in his Aunt’s home!). Looking at her facebook page you would think she is making a fortune with all the playing she does! In fact she is a college graduate ( non tech) and earns about $12,000-$15,000/year. OMG, at her age I was married with 2 kids ( and a third on the way), living in my second California home ( both owned with a mortgage). It is like the teenage phase never ends for this generation ! Of course why get married when the government gives all kinds of goodies to the single Mom’s ( she has no children…yet). I do feel for this generation, two of my kids are married and scraping by, the third is living in my basement. He could afford to move out but he would rather save money and besides if he asks nicely my wife ( his mother) will do his laundry for him!

    • Well they seem to all have nice new cars, clothes and gym memberships now don’t they! I spent most of my money on my rent and paid cash for a beater car and just did anything to NOT live at home! On reputation alone, I and my friends wanted to be on our own, it was time to move out when you turned 18. We wanted to, and of course our financial priorities changed.

  • californianative

    The mere fact that I have a basement tells you I no longer live in California. I left in 1994, taking 4 other native born Californians with me. Although I missed out on the great real estate run up preceding the dot com and current bubble I have quadrupled my income and increased my net worth significantly. My children all make more money than my niece in California ( they range from $ 35,000-$ 50,000/yr) and live in the Southeast where the cost of living is at least 30% less. My niece could never leave the beautiful coastal California weather. I mean if I was contemplating homelessness ( as she must be at times)
    I would rather live under a bridge in Coastal California than any where else in the continental U.S. !

    • Alex in San jose

      So, 30% less cost of living but half the pay, the neighbors on one side are Holy Rollers and the neighbors on the other side are Klan.

      Our bridges are ready to welcome you!

      • Very few areas in the U.S are “holy rollers and klan”, those areas make the news and make you, Alex, think all of “flyover country” is like that.

      • Alex in San Jose

        Steve – The flyover country I’ve lived in has indeed been like that.

        Go 30 miles south of San Jose and you’re in deep Xtian fanatic, waiting-for-the-Rapture, survivalist, militia-nutzo, territory. Hell some of those nutzos down there made the news by shooting up the local power station (in every crappy survivalist novel you can hold your nose and read, that’s Tactics 101, shoot up the transformers so the evul libruls won’t have ‘tricity to uhhh … brainwash your kids or something).

        Yeah, rural/flyover areas can be cool in some ways, people tend to know each other etc., but I got tired of the fanaticism, B.O., gunshots in the middle of the night, horrific home invasions (with torture) a block over, etc.

        Seeing horses traffic on the road and waving “hi” to fellow country bumpkins doesn’t make up for the drug trafficking, and the dog-fighting arena and it’s noise at night.

  • “Although I missed out on the great real estate run up preceding the dot com and current bubble I have quadrupled my income and increased my net worth significantly.”

    Californianative,

    That was my experience, too. I left CA in 1990. I am also glad that my way higher income was not subject to state income tax. I am definetly much better off than if I would have stayed in CA.

    • apolitical scientist

      And I started working in CA in 1988 – and bought a house 3 years later. As it turns out this was exquisitely bad timing and I was underwater for the next 7 years. Even so, just sitting on my ass in lovely Southern CA, my little crapshack is now paid off, (supposedly) worth $550K and my net worth is many times that.

      My point is that if you can find a decent job and hang onto it, CA can still be a pretty good deal. Sure I may be one of those entitled Boomers who just hit the generational lottery, but I see youngsters jumping onto the hamster wheel in Aerospace just as I’m jumping off. They’re starting at $75-90K fresh out of school (lots more with an advanced degree) and will be well into the hundreds if they hold out for a few years. These are the ones who’ll be buying houses here in the next decade. And even if they get caught on the wrong side of a housing bust like I did, they’ll probably end up getting comfortably rich over the long haul as well.

      I’m not arguing with the overall thesis of this blog. CA is certainly overpriced and probably in another bubble. But twas ever thus. If you have the skills that sell in SoCal it can still be a decent place to live well and make a career.

      • Apolitical,

        I am not arguing that boomers had it good. I am a boomer and did excellent. However, past performance is no guarantee of repeat success. Due to QE and ZIRP, which was a tremendous factor in major bubbles, the lifestyle you can enjoy with 2 millions in flyover country requires 5 million in SoCal.

        Like in the past, I am not talking just cost of a house, but “LIFESTYLE” as in quality of life, the quality of the house and the neighborhood being ONLY one variable. In bubble areas the QE and ZIRP had an amplified impact, therefore the quality of life in SoCal is greatly diminished unless you have substantial assests.

        You know that the conditions the boomers experienced can not be reproduced going forward. Globalism is decimating the middle class as we speak and US no longer is the manufacturing hub of the world like it was in our youth or even more, after WW II.

        In conclusion, do not extrapolate our youth conditions to the millenials because you know as much as I do that they no longer apply. The aerospace in SoCal is just a shade of what we had during Reagan years and cold war. As me, you have a tendency to live in the past.

      • Apolitical,

        I agree with you that CA always had booms and busts and that it always comanded about 50% premium for the weather. Here we are on the same page.

        However, the QE and ZIRP moved CA from that historical line. QE and ZIRP influenced the whole RE in USA but not to the same extent that it influence the major bubble areas. The reason the fenomenum is amplified in CA is due to extreme levarage which is not practiced to the same extent in the rest of the country.

        For example, in some areas of SoCal, in 2008 prices dropped 50%. At the same time in other non bubble cities prices dropped like 5%. When they go up, they also go much faster and more as a %. SoCal RE behaves differently that the rest of the country.

      • I think that’s right. The real problem that people are finally waking up to is that our economy is going through another dramatic transition and it is further exacerbating the wage and wealth gaps that have been forming for years. You basically have two sets of people in this country now, those that have been able to take advantage of central bank largess and the financialization of the economy (mainly in technology and finance), and those that don’t have the same skills, education or access to reaps those benefits. What people really should do right now if you are children of the middle class or working class is learn as much math, science and engineering as possible. People who live in what used to be third world countries have figured that out, it’s really bizarre to me why Americans haven’t gotten the message.

      • True, I see a lot of people from study real estate lately in Orange County deciding to buy 31 to 50 year old housing that they would not 15 years ago when everything has to be new. Rent is going up so the little 1 bedroom condo for 278,000 to 350,000 does looked so bad.

      • Median salary for an areospace engineer is 83K (50th percentile) and the range is 60-120K in los angles. If you are a director or above, you will obviously make a lot more.

  • Demand From First Time Home Buyers Hits 21st Century Low

    1. Delay in marriage (Dual incomes missing)
    2. A lack of a strong paying full-time job with security.
    3. Older Americans are unable to retire due to lack of savings – they replace younger workers, who have trouble finding jobs.
    4. Having enough for a down payment plus closing cost with taxes impounded is a lot for young aspiring home buyers.
    5. Renting isn’t considered a bad option anymore from young Americans.
    6. Exotic loans that allow would be homeowners to obtain credit without collateral or income verification are removed from the market.
    7. Financially strapped parents are unable to “gift” down payments for first home purchases by their children.
    8. Student loan debt impacted household formation from rising and making it more expensive for first time home buyers to buy.
    9. Despite the weak first time buyer market, home prices go up in many markets due to the lack of inventory, keeping home ownership even further out of reach.

    With all these factors in play, we simply don’t have enough qualified home buyers once you removed the cash buyers, to generate a housing recovery.

    That’s for ownership…

    Demographic profile are huge for ages 18-34

    In fact ages 21-25 are the biggest in America

    Everything is taking longer and longer to happen

    Model for young home buyers

    1. Rent
    2. Date
    3. Mate
    4. Marry
    5. Typically 3.5- 6 years after marriage = kids = home buying

    The kids haven’t even really started their mass demographic rental cycle yet

    • I think you’re right, but the key is that things are just being delayed, which if you think about it, actually makes a lot of sense. People here rail about how Millennials are lazy and stupid, but the reality is, as a group, they’re still subject to economic forces. It is a natural tendency for people to spend less (or push spending out into the future) and save more if they are under economic stress and this is exactly what is happening and it is very rational, but it isn’t likely to stay this way. The rental boom has already happened and has probably peaked, you can tell because of the multifamily construction boom. I think what will happen is that rents will stabilize soon, these folks will eventually get married or at least find partners, they will move out of their parent’s basements or their apartments and they’ll want to buy smaller houses or condominiums in urban areas. There are still a lot of incentives for people to buy in this country, it has to do with culture and the tax code. People thinking that there is going to be some dramatic plunge in home prices are probably going to be disappointed. I think the Millennials will actually stabilize the housing market in the years to come.

      • @Dean

        Do explain why you think that millennials will buy in drove at currently high or slightly lower but still high prices? Will economic trends miraculously reverse after ~15 years of stagnant wages? Instead of buying back their stock or acquiring other companies, will corporations decide to hire more domestically and create the exponential wage inflation to comfortably afford today’s prices? The money on the sidelines explanation has been bantered for past 5+ years with little result.
        Didn’t you buy recently?

      • Maybe… I think the Millennials will actually stabilize the slow housing crash in the years to come.

      • @Prince of Heck, I didn’t say Millennials will buy in droves, I just mean they will eventually participate in the real estate market, it will just take them more time, that’s just what typically happens when you push consumption out into the future. Declining home ownership rates right now mean that there will be more buyers in the future, I think that’s a stabilizing factor. If you had the opposite, historically high home ownership rates (like in 2005-2006), you increase the likelihood of declining demand in future years, which is what we saw. I agree that things seem crazy right now, but it will eventually level off and with the current buyer pool, you’re not going to see people ditching their homes en masse even if there is a decline in prices, even a dramatic decline like 15-20%. People will just stay put, inflation catches you up and once Millennials have enough savings (and they eventually will, the question is how long will it take), they will jump in. This is just conjecture of course, but I think it’s consistent with historical patterns. And yes, I bought recently with something like 40% down, it’s new construction in “Silicon Beach”, we signed the contract around Q3 2014 and the house was finished this past summer. According to comps, prices have increased by 50% above my purchase price. I’m not sure that’s real, in fact, it’s probably not, but those are the comps. So what I’m saying is that even if prices were to drop by 30-40%, I would be right back at my purchase price and still have the 40% I put down in equity. I don’t think my situation is atypical either, this is just how things are right now.

      • @Dean

        I don’t see how millennials become the stabilizing force you claim they will be unless they buy in droves. Without dramatically higher wages (doubtful) or dramatically lower prices, the home ownership rate will most likely continue to fall.

        A 15-20% would most likely be preceded by a severe recession and inevitably mass lay offs. In the last downturn, the vast majority of those who lost their homes were prime borrowers. They either could no longer afford their house payments or were unwilling to pay for an underwater mortgage. Even corporations walked away from their obligations. Investors represent a large buying demographic in the current “recovery”. They or their shareholders sure will not stick around to see their portfolios dwindle by even 10%.

        By “inflation” to rescue prices, you’re hoping that the Fed and government come charging with more financial engineering. With rates already at 0%, what ammo do they have left to force prices up again despite falling demand? I doubt that traditional inflation, especially during a period of wage deflation/stagnation, is the savior you’re looking for.

        Are you the same Dean who rationalized his recent CA purchase at currently high prices by denigrating those who chose lower prices outside of the state?

      • New construction in Silicon beach namely Playa Vista will be and is desirable for millennials. Community pools, shared grills, gardening are taken care of for you and whatever other services you desire. A high HOA and Mello-Roos does not deter this group. We have to remember 2 things about this demographic:
        1. The concept of saving with millennials is gone. They have never had a chance to create wealth on their own and have not seen the benefits of investing.
        2. Their parents have shown them how to create debt, leaning on their house for kids college tuition or ignorant signature to a college loan (forced).

        It’s the selected millennials that will pick up a hammer build a ladder and push their way out will succeed. This demographic works hard, they understand they have hardship. Unfortunately most will fail to take action (let alone have the ability to fix problems) and take responsibility, they want a hand out… a Bernie Sanders hand out.

        Family will come around for millennials in a few years. Most will stretch far and beyond 50%+ of their income for mortgage, you betcha! Family first and realization later. If the housing market does meet the standards of millennials. It will fail later with them with their poor judgement. Prime time for global investors and the millennials that made something of themselves to buy it up. Rinse and repeat.

    • Logan,

      Based on your timeline we are still some years away from millennials starting a family and merging into home ownership. I’m having a hard time seeing millennials massing into home ownership. Dual incomes and emotions of owning a house i’d hope would be enough to get them out of renting. The value of a SFH will have to meet the income of this demographic to get them knocking.

      • I agree. It’s still is and always will be about qualifiable demand based on local incomes. The laws of economics have been repealed only for the top 1% of 1% of 1% who have enough influence to borrow cheaply and substantially.

  • Wife and I looked at some more houses in the Great Park development (Harper at Beacon Park) over the weekend. These are the cheapest detached houses in the development to my knowledge, which go for around $800k-$870k for 1,700 to 2,000 square feet (which about the max we could pay if we stretched).

    I am sort of baffled that there are seemingly so many people out there that can afford these houses. Are there that many foreigners coming here with suitcases of cash? Does everyone earn more than us? It is so discouraging. There is no way we would stretch ourselves to the max and pay almost $900k for a relatively small tract house. The only thing we feel comfortable doing is renting in our current place until prices come back to reality (whenever that might be). We own a rental property we can move back to if things ever get really out of control, which we might have to do at this rate.

    Oh, I almost forgot. The sales literature stated that mella roos ranges between about $5,300 and $6,000 per year for these houses, and HOA dues range between $141 and $216 per month. So with the cheapest house (let’s say $800k), cheapest mella roos, and cheapest HOA rates, you are paying $15,660 per year or $1,305 per month just for the privilege of owning a new house in Irvine. Absolutely crazy!

    Although I know there are obviously cheaper houses out there in OC (but not substantially cheaper for anything decent), the above might be one reason why some folks still live at home. The cost of owning a house here is out of control.

    • Responder,

      You hit it right on the mark.

      So many foreigners… So much money…. we are soooo screwed.

      • Alex in San jose

        Yes there really that ma y foreigners with suitcases full of cash…. And it’s only “Mella Roos” if you’re from the Midwest.

      • You just see the fruits of globalism. Stop electing globalists regardless of what the media is saying. Not all candidates are globalists but all those coming from CFR and Trilateral Commission are.

        Forget about the D or R after the politician name. Look at where they stand to fight the banker’s wars. Otherwise say good bye to the middle class. Don’t listen to the retoric of Sanders (a communist) and Clinton (a crony); they are as globalists as Obama and Bush and McCain.

        As long as you elects globalists, say good bye to the middle class or forever being able to afford a decent house in a safe neighborhood for you and your family.

    • Yes, a lot of foreigners like L.A. area! But, don’t be fooled … if you are a serious potential homebuyer in So. Cal., you are in a small select group. It just appears that everyone else has money, but it is the same small group of buyers/investors! Second point, the number of monied buyers is finite, it is not like pre-2006 years where everyone and anyone could get a mortgage. We will see a housing price decline due to affordability and/or another recession. And as always, which zip code you live in will determine how big of a haircut you take … a beach-front address will always be valuable, while one of those fringe neighborhoods could end up with no hair at all!

  • Tell it like it really is. The housing market has nothing to do with “housing” anybody anymore. In California it’s not tied to income at all–that’s why the average working Joe has little to no chance at purchasing a home you would actually want to live in. It’s all a big game and if anything remotely decent comes on the market its subject to a bidding war in all cash offers–like every working 30 year old has an extra $500,000 – $1,000.000 sitting around in cash (professionals with advanced degrees may have the lower end of that in student debt though.)

    Tell the truth about “rental armageddon “–it’s mostly due to the ultra cool idea of Air B N B. Corporations disguised as mom and pop operations figure why rent a place for $2,000 a month when they can get 5 times the amount using it as an unregulated hotel room?

    If I were young, I would realize the cards are hopelessly stacked against my financial future and get out of Dodge. Or live with my parents, which is apparently what most have decided.

    • Alex in San jose

      I honestly think something is going on like Enclosure in England where the landowners expelled the serfs, causing an army of unemployed and desperate people to move into the towns, becoming the proletariat Marx wrote about.

      The housing bubble is worldwide. Young people not being able to buy a place is happening worldwide.

      We have literally millions of homeless people now. I don’t remember this even back in the Starving Seventies. (It took the date changing to 1980 for me to weigh 100 lbs, and I was 18 in 1980. At least I was a hard worker! ) We had like two “bums” in town and that was it.

      There’s a major class war going on between the rich and everyone else, and the rich are winning.

      And this is why I want everyone to have guns. There’s the argument that an armed populace can’t take on an Abrams tank, but in fact guys in nightshirts and sandals are kicking the US military’s ass over in the sandbox. And more and more grunts are signing up to keep their families out of poverty, or to escape poverty themselves.

      Kent State? Yes, you in the back, you bring up Kent State?

      The National Guardsmen were working class. The students were the Haves of the time, middle c!ass kids who’d never get sent to Viet Nam. And they baited the hell out of the Guardsmen.

      Now, the situation is much worse, more inequality, more division.

      • Alex,

        What is going to happen after you vote for Hitlery and she comes to take your registered gun? She promissed that….After you lose your gun the next step will be that you lose your freedom of speech here on this blog – you know those with guns have all the rights and those with none have zero rights and freedoms.

      • Alex in San jose

        Hillary’s not stupid enough to go after everyone’s guns. Hell, Obama was actually very good for gun Rights, allowing guns in national parks, and look at all the concealed carry now.

      • Alex,

        It doesn’t matter if you like your gun, with Sanders or Clinton you will lose it. For the left that is the goal. Read below what the left is saying about guns:

        “Waiting periods are only a step. Registration is only a step. The prohibition of private firearms is the goal.” ~ Janet Reno
        “We’re going to hammer guns on the anvil of relentless legislative strategy! We’re going to beat guns into submission! ~ Charles Schumer (Next in line to become the Senate Minority Leader).
        “We’re here to tell the NRA their nightmare is true!” ~ Charles Schumer
        “If I could have gotten 51 votes in the U.S. Senate for an outright ban, picking up every one of them….”Mr. & Mrs. America, turn’em all in,” I would have done it.” ~ Diane Feinstein
        “If I had my way, sporting guns would be strictly regulated, the rest would be confiscated.” ~ Nancy Pelosi

      • Alex in San Jose

        Flyover – You do know that Dammit Janet is a distant memory? Who thoroughly discredited the gun-grabbers as a whole by ordering the massecres of harmless families and religious cults?

  • U.S. housing over the next 20 years will trend toward high-density urban developments, much like Europe, to accommodate Millennial’s increased desire to work and socialize among groups they identity with. A good example of this is Redwood City in the Bay area, building high density units near public transportation near high rise office buildings. But some cities don’t get it– Palo Alto voted down a 225 unit development in favor of keeping a Fry’s store.

  • @HJ “Schools need to start allowing children to think creatively and abstractly. Then teach about money and entrepreurism. Our education system is so crap and it is, among other things, what is fundamentally wrong with the direction this country is heading. The tax code also kills businesses. If you are self employed in this country you should be rewarded by paying a lot less taxes as an incentive”.

    I am not sure this can be blamed on schools, rather it is a parents job to teach their children about life, the cost of it and that they will need skills that get paid to have a happy life.
    It would be nice if there were both high school and college courses that covered these topics, but really, if the parents haven’t covered this in middle school and pushed the kids to work hard during high school to get set up for a good college experience, it is to late anyways.
    I do many home loans for people in the country on H1B visa’s, as companies need their engineering skills. These are high paying jobs that are lost to our children because they will not put in the effort to excel in math and science. Our kids are being done a dis service with the lack of emphasis on the subjects so they can take other electives and crap that will never get them anywhere.
    Parents, push your kids or they will be living in your basements.

    • education starts at home

      poor and stupid parents have poor and stupid kids

      poor and stupid people are not reading this blog

    • Alex in San jose

      Jim, puzzle us this: Why are companies hiring lukewarm H1b’s that you have to hire a few of to equal one real engineer, while passing over competent Americans who will happily work for the same or less?

      Is it sanjay in HR playing his old tricks again?

      • “Why are companies hiring lukewarm H1b’s that you have to hire a few of to equal one real engineer, while passing over competent Americans who will happily work for the same or less?”

        Because Obama wants more immigrants legal or illegal – more slaves on the plantation. That gives the middle class a race to the bottom for wages. I told you, Obama is a globalist and as all globalists they promote mass immigration (see Europe – Sorors is number one who supports that mass migration). Every time you elect one from the good old boys club (Council of Foreign Relations) you elect a globalist which means you elected a puppet for the banking cabal. And yes, your darling Sanders and Clinton are as globalists as Bush and McCain or Romney. The diference is ONLY in your perception not in their agenda.

    • Jim, that’s not quite what I see. It’s more like employers abusing H-1 visas. There’s no shortage of talent here, in this country. It’s strictly about paying lower wages. In my experience, they end up paying the same or more for someone to come behind the H-1 folks to fix the mess they made.

      • Alex in San Jose

        I’ve seen this more than once in companies. One company I was with, poured millions of dollars into “the ATE system” (ATE = automatic test equipment). They never got it working. Just a financial black hole.

        Yes indeed on having to hire real (American) engineers to clean up the mess the H1b’s left.

  • Viva la buzzkill

    Squishy parents just think of your grown-a$$ children as “caretakers of the old family homestead” when you go off to work as a greeter at Walmart, or a demo lady at Costco…….Latch-Key-Kids Forrrrr….evaaa!!!!

  • California isn’t the only place where rents are crazy, as this excellent article points out. Higher rents make it more difficult for otherwise gainfully employed people to save for a family home. Median rent in the Denver metro area for a 1 bedroom is nearly $1,400 per month. I REALLY hate spending money and rarely eat at restaurants or travel. We have scaled our lifestyle back, and it is strangely liberating. We eat at home more. We do more outdoors because it’s free. Less is more, and it kind of has to be when a significant portion of our income goes to rent.

    Many of our friends and family members are buying homes in Denver, and they question why we aren’t as well. My reasoning is that not only are prices insane here, it is almost impossible to avoid bidding wars. It’s a lot of stress and ado for a home that is already overpriced and needs considerable work. And I don’t mean these places need granite counter tops — I mean they need $10k in electrical updating and new big ticket items. (roof, landscaping, plumbing, etc.)

    Historically, taxes in Denver and metro areas have been low. Not anymore. Property taxes remain low comparatively, but there was a HUGE hike last year. When “values” increase close to 15% in one year, what can one expect?

    • Alex in San jose

      Anon – that’s scary. Look at the earlier posts, someone here cited that figure as the average rent for a 1-bedroom in LA.

      At least LA has beaches, and higher pay, and a mild winter, and the chance that your kids might get their SAG cards. I could probably make a living off of my sketchpad in LA, I’d have a hard time doing that in Denver. The Rose Bowl swapmeet is an ebayer’s heaven.

      • Hotel California

        Same ol’ tired stuff regarding how everyone wants to live here. Surfing and skiing in the same day that no one does because the traffic sucks at any practical time. Overrated and nearly unattainable lifestyles of the rich and famous. Great climate after conveniently forgetting about the times when it’s not.

        Most people in SoCal don’t go to the beach on any sort of regular basis. I’m willing to bet at least 99 out of every 100 people hasn’t been to the beach in the past year. And for those that do, it’s a crowded pain in the ass at any time that most working people have availability to actually go. A lot of the beaches are scummy to boot.

        Higher income level doesn’t make up for the higher cost of living, which is mostly inflated housing.

        These summer heat waves sucked, even by the beach where I live, now I’m running the heater in the mornings, supposedly the El Nino is soon going to dump gobs of rain, droughts, pollution, Santa Ana winds, mud slides closing down a major freeway as a preview, all of these things are part of the reality.

      • Alex in San jose

        It’s still not the misery that is flyover country. And I can hop on the 17 bus and spend the day in Santa Cruz with no parking hassles at all.

      • Hotel California

        “It’s still not the misery that is flyover country.”

        Flyover country is not the misery that is the Bay Area or SoCal.

        It works both ways. Details matter.

      • Hotel California

        Hilarious. We always get the folks who bring up taking the bus. Yeah, taking the bus, now that’s some fine living!

      • HotelCalifornia: You forgot the quakes.

      • Yes, I agree- Denver is crazy considering there is no beach here. But there is plenty to do if you ski/snowboard. Winter sports / mountain activities are to us what the beach is to Californians, probably. The problem with snow sports is that lift passes for ski resorts have become very expensive. Also the traffic to/from Summit County (Vail, BC, Copper, Breck, etc.) is really horrible on the weekends. In recent years it has become prohibitively time consuming and expensive. The irony is that you’d need to work 60 hours + per week to make enough to live here, leaving little time to enjoy the kinds of activities that attract people to Colorado in the first place.

      • Hotel California

        Dweezil, actually I didn’t forget the quakes. They weren’t worth mentioning.

    • “Average apartment rent within 10 miles of Austin, TX is $1452.

      One bedroom apartments in Austin rent for $1245 a month on average and two bedroom apartment rents average $1659.”

      https://www.rentjungle.com/average-rent-in-austin-rent-trends/

      Average wages in Austin are way lower than CA cities. Austin is talked about as a “less expensive” city compared to others, but it just isn’t true anymore. There is no escape – anywhere you would want to move in flyover country that still has jobs also has unsustainable housing costs.

      • Hotel California

        Bullshit. Austin is an outlier along with maybe a couple of others. Most of so-called “flyover” has a better ratio of income to housing cost. The empirical data is available. I’m not going to look it up for you.

      • Alex in San Jose

        Bub – exactly. I was living out in Arizona for a bit … when I left to get back to reality (California) a couple of people I knew moved out also – they were a rare thing for Arizonans in not having criminal records, so they could move without having to ask a parole officer lol. When I ran into them again out here, they told me the it worked out the same as if they got their Arizona pay but housing was free.

        (I should mention that in Phoenix, menu for the prison for that day is broadcast on the popular music stations, so you can keep up with what your family member(s) are having that day. That’s just a natural thing there. Also, in my experience, any TV set left on in Arizona sooner or later starts showing COPS … even if you parked it on PBS.

  • The millennials are such losers. The parents are to blame. There are no bad children, only bad parents. The parents spoiled the children to try to buy love. If a person wants love, get a dog(cats are not dumb like a dog, they know your weaknesses). Many women now are getting a dog and not having children. Some of them spoil their dogs and it is good that they did not have children.

    • Agreed. The millennial generation is lazy, disengaged, and ill-prepared for the future. They were spoiled growing up and now expect everything to be handed to them. They are more interested in social media then furthering their careers. Good luck to them, they will need it.

      • I am a millennial – graduated college in 2008 and professional school in 2011. I worked through all of my schooling, paid much of my own way, and have ZERO DEBT. I drive a really old car to save money, as does my husband. I have done everything in my power to further my career and to put money in savings. I have a good job now, but yes… my parents helped me a lot financially, especially through school.

        Instead of having them drop thousands to give me the “college lifestyle” that everyone raves about, I chose to live at home and work and pay as I went to avoid debt during college. It was a lifestyle trade-off, both for me and my parents, but it paid off. I was criticized by many at the time, but now all of the kids I knew who wanted the “college lifestyle” are making as much as I am…we ended up in the same jobs/fields…the only difference is they’re paying interest on their loans, and I am not.

        Parents send their [millennial] kids to these ridiculous private & out of state colleges so they can brag to their airhead friends at cocktail parties about how “independent” their kids are. What a joke! Parents are still paying the bills, or worse – they’re pressuring their kids to take out insane amounts of debt just so they can live the famed “college lifestyle.” In this economy, we have to ask ourselves if it’s worth it, but then the follow up question is: what are some high paying careers with upward mobility that do not require a college degree?

        As for millennials being spoiled, I must agree with you somewhat there. I resent my own generation in a lot of ways, except for the fact that a lot of us, despite really strong efforts and high levels of educational achievement, really struggled to find good jobs post-2008 meltdown and therefore I think some of our careers were a bit delayed. I was one of them and have decided to delay having children if/until we can support them the way we really want to. I also feel for some of the boomers who didn’t prepare for the economic crash. So many of them, and their kids, lost their homes and their livelihoods. It continues to have a ripple effect on housing and job prospects for Gen Y/millennials.

      • Anonymous: you are an old soul. I don’t care much for my own generation either [boomers]. Rebelled against their parent’s “materialism” and conformity and then became their parents x10.

        Never rest against putting yourself into debt. You’ll be able to survive no matter what comes your way.

    • I fully agree with Laura Louzader’s reply a little belog your comment.

      It seems to me that the generation that had it easy was the boomer / protest generation. Being born right after them (ok, in the Netherlands but the story is about the same) I could see them prosper with very low cost / long student years, subsidized cheap housing, good government jobs, all paid by the government.

      The minnies and the generation in between get confronted with short, expensive studies, less job prospects, higher taxes, expensive housing and the knowledge that the social benefits are not going to save them later on in life. It’s like robbery almost.

  • I think we should flip the question and ask why so FEW young people are living at home. In many countries it is considered normal for kids to return home to save up some money and then move out. In our consumer driven economy – everyone is pushed to spend everything you have and then spend everything you can borrow.

    According to the St Louis Federal Reserve bank the current savings rate is 4.8%. This is in line with modern day savings rates but is much lower than the savings rates we saw in the 70s and before. https://research.stlouisfed.org/fred2/series/PSAVERT

    We should be encouraging people to save more – not less. Too many people are only a couple of paychecks away from disaster. I think we are finding out the hard way, a consumer based economy is not a sustainable one.

  • It should come as no surprise that there are a record number of young adults living at home.

    I wonder what sort of pressures younger adults who are allowed to stay at family home live with. It will be a mixed bag I suppose. Some with parents who don’t understand the bubble and give them a stressful hard-time for not being house-easyrich success story like themselves. Others with more understanding parents who recognize the challenges/dangers of taking a jumbo mortgage.

    Either type, there will have to be compromises in living together (yes I know other cultures do it); the natural state is homeownership (but not at preposterous prices where you become a mortgage debt slave and at risk in recession/correction).

  • I beg to differ with Ira- the minnies are not losers at all, but a generation confronted with more economic challenges than any other since the Great Depression, in which those of my grandparents lost the first decade of their adulthood. My grandparents, too, had to live with my great-grandparents well into my mother’s childhood, and they were distinctly not losers- my grandfather had a career track job, and was glad he had ANY job, for many people around him did not.

    The young people today are graduating from criminally overpriced colleges to confront a job market that offers fewer “breadwinner” jobs than at any time since 1940, and with crippling college debt, and a future in which their slender prospects for advancement are diminishing in the face of increased off-shoring, uncontrolled immigration, and increasing automation. There are fewer job niches for people of various talents and levels of ability with each technological advance, and we are now also confronting the end run of 50 years of spectacular extravagance and waste, during which the “greatest” generation, the Silents, and we Baby Boomers squandered the incredible endowment of resources this country had at the beginning of the 20th, and made no provisions for a future without them.

    Good luck to the minnies, they will need it. My niece and nephew, 34 and 23 years old respectively, are absolutely not losers, nowhere near, but they are dealing with far more adverse conditions than my generation ever imagined. I’m with Anna Mouse- until our affluent modern times, multi-generation living was the norm, and many people spent their lives in households containing 3 generations It might even be a good way for many people to live, and not just for financial reasons. A young mother might like someone to be with the kids while she takes a nap, and a grandparent might want the presence of her family. A struggling young family with a couple of kids might do better not subjected to the financial stress of home ownership so early in their marriage.

    • you remind me of a poster by the name of compass rose that used to post in here. she had the same wisdom of an older lady.

      alex in san jose entertains me the way what? used to

      • I remember Compass Rose well, and I miss her. I hope she comes by this site again sometime.

    • Totally agree with millennials being saddled with more economic burdens in several generations. Their professional lives are literally caught up in a prolonged period of economic stagnation. Outsourcing, technological obsolescence, and just the lack of economic advantage (cheap labor costs) are the main culprits

      In addition, previous generations seek to maintain their lifestyle through high debt. That debt is passed on to millennials in the form of inflated education, housing, and food costs.

      • i have boomer friends who paid a years worth of tuition at ucla and or csula with a summer job and still had money left over. ask me why i think boomers are spoiled

    • son of a landlord

      Laura: The young people today are graduating from criminally overpriced colleges

      Even so, many Millennials are to blame. Some sought degrees they had some plausible reason to believe were marketable. STEM, business, etc. But others pursued worthless degrees. Film, gender studies, medieval poetry, design, etc. A little research would have revealed which degrees guaranteed a career in burger-flipped and coffee serving.

      Yet many Millennials imagined they were special snowflakes. That their dreams of a high-paying career in film, fashion, publishing, TV, were assured by their own sheer wonderfulness.

      • You make a good point. I would add that it is disturbing to hear some political candidates build their platforms around giving loan forgiveness and promises of “free college.” As everyone here already knows, nothing is EVER FREE. Nothing. So what we need to try to focus on is reducing college costs and stop using college as a way for 18-22 year olds to have a certain kind of “live it up” lifestyle for 4 years. Yes it’s a generalization as I know there are many serious and hardworking college students out there, but I think the U.S. college experience/mentality of “party for 4 years and graduate and suddenly you must be an adult and function in society and own a home and have a stable, high paying job” isn’t realistic and it’s a system that is churning out a generation of people who don’t have the skills or the mindset to contribute to the economy in a tangible way. In my parents’ day (they’re turning 60 this year) there was plenty of partying and such, but since so many of them were 1st generation (parents are of German/Italian descent) there was a lot of pressure to matriculate to professional levels because their immigrant parents could have only dreamed of those opportunities. Women might have earned degrees but more often than not, had children and may or may not have re-entered the workforce. Totally different culture, in my opinion.

    • Parents or anyone else should not whine about college costs, unless they are paying it. “College is so expensive, my kids will be in debt forever”. My wife and I sacrificed, lived modestly and saved. Our combined incomes rarely exceeded $125k. But we invested, worked hard, and paid cash for our kids Private Colleges, Baylor and TCU. Both kids make good money, have no debt, live on their own…..One bought a house,,,,in Georgetown,Texas. We got our net worth back higher than it was before the kids entered college and now smooth sailing…………..Native Californians, we moved to Texas in 2014. We love it……….and we got lucky with all the rain out here in the last year. Hope you guys get more than your share this winter……….

      • Yes, I live in Kerrville. The baby boomers are the lefties who got all the government benefits by the government financing them with debt that their decedents will have to pay. They had a big party and left the bill to the children to pay. Big government is great when somebody else pays the bills. Bill Clinton’s wife is promising all types of great government benefits(remember she is competing with that socialist). The Clintons are multi millionaires and you can count on it that they will not pay the bill. As Kinky Friedman said, “A happy childhood is the worst possible preparation for life.” In other words, don’t spoil the children of all ages.

  • Alex in San jose

    Laura – I agree. The kids are alright. They are the 2nd Great Depression, is all. Owning a smartphone now is no different than owning a phonograph or a radio then, with about the same cost, inflation adjusted. They see the 3/2 rancher on a quarter acre where you have to drive everywhere as the scam it is. They’re into bicycles because bicycles make sense. They may go into the liberal arts because studying things like the French Revolution will be very useful for times to come. And besides, their STEM friends are bagging groceries.

    • Alex,

      You said that you are a liberal left of Lenin and here you are telling us that Obama (your messiah) is a liar. I heard him saying for years now, along with all liberal MSM that he sees the green shoots of recovery. So, are we in a recovery like Obama along with all the chorus from the left were bragging since 2009 or are we in a Great Depression. I agree with you that for all the average Joe it feels like Great Depression, but who is lying – you or Obama whom you elected twice?

      • Alex in San jose

        Obama has made things less bad than they’d be under a republican president, but I agree, it’s not been much of a recovery for the 99%.

      • Alex in San jose

        On, and I didn’t vote in either election. After losing everything in the crash, I was kinda sorta homeless and my papers were not in order.

        I was filling out my drivers license renewal form and though the DMV was awfully interested in my politics, then realized I’d registered to vote! Signed that form, filled in the actual license form, and popped them in the mail. I’ll vote by mail, if the ballot gets to me OK.

      • Almost everyone I know on the left do not like Obama; and most can’t stand him. Where are you getting these crazy ideas? Many of us recognize Obama as a weak corporate shill who’s economic policies are run by banksters & foreign policy run by crazy neocons who think America should own the world. I think you’re buying into what these crazy corporate funded zealots on Fox news & various radio shows say.

      • MarkinFS,

        How do you know that I am getting my info from Fox? Just because I dared to critisize what Obama is doing? By your own admission, everyone you know is doing the same thing and say exactly what I am saying. Are they getting their news from Fox, too?

        You also admitted that I am right about Obama. Does it mean you also take your news from Fox or you just have a reflex saying that?

        In all my comments I was saying that I am my own man and make decisions based on critical thinking not based on left/right propaganda. I am fed up to the max with that. Fox is part of MSM, which is owned by 6 globalists who promote all the bankers wars. I have total disdain for everything which has to do with MSM; maybe because I was raised in a communist country and I developed a reflex against everything which has to with statist propaganda? You tell.

      • Alex in San Jose

        MarkinSF – Obama looks really good compared with whatever republican loon has been in office lately, or the even loonier ones running now.

        He *has* done some good things.

        However, yes, actual liberals who walk the talk hate him, because yes, he’s still a servant of the oligarchs/corporations just like any president would be now. Look at what happened to Kennedy when he put money on the silver system and threatened to break up the CIA.

        For an example of a liberal who’s a lot harder on Obama than I am, check out Ted Rall at http://www.rall.com who’s a writer and cartoonist.

      • son of a landlord

        MarkinSF, my local paper, the Santa Monica Daily Press, has mostly liberal columnists and letter writers. They’re still praising Obama.

        Just this past summer, “Santa Monica Forward,” a local “progressive” group, thanked the Supreme Court in the paper for preserving Obamacare.

        Santa Monica Forward wrote:

        “Thank you for preserving affordable healthcare for millions of Americans, forcing fewer Americans to make the trade-off between paying their rent and investing in their health.”

        http://smdp.com/week-progress-america/148974

  • This problem of younger generations with no money isn’t going away! Consider the following. The national test scores for 12th graders shows that significantly less than 50% of those young people aren’t proficient in any skills, including reading, writing, math, civics, history, and so on! If our kids can’t even read or write, there is no way they are going to acquire the necessary skills to compete in this world! Second, much or most of our working population is simply not competitive, or conversely still makes too much money for the work they do by global standards! While American’s obsess over the American 1%, fact is, America is home to 75% of the highest paid 1% earners in the world and I am not talking about millionaires or billionaires. Anyone making $34k or more, is among the top 1% of wage earners in the world. This is expensive overhead for companies fighting over market share on a global scale … as stagnant as wage have been, companies can still hire several workers for one American worker! And, when you consider the impact technology has had on reducing the need for labor, the picture isn’t pretty!

    • JNS,

      What are you talking about ???!!!….All I hear in over 80% of the media is how low the US companies pay their workers and how the government has to intervene to set the federal minimum wage at $15. Of course, when I hear that I am asking if $15 is better as a minimum wage that $8, why not make it $50. Surely that must be better for the US and the US worker. Or, is it…!!!!…????

      I am sure if Alex here will elect Sanders, he will fix all of that and his anual pay will increase from $10,000 to $50,000. What’s not to like? Probably the new rent of $12,000/mo and/or $20,000,000 for a condo but what does it matter….the number of millionaires will surely go up under his presidency. Mugabe in Zimbabwe did that and now that country enjoys the highest percent of billionairs of all countries; more than in US.

      When Chavez of Venezuela saw such a big success in Zimbabwe he was determined to follow the same example. Now it is the turn of US to follow the same example by electing Sanders. Praise the lord, pretty soon we’ll all be billionaires.

      • Alex in San jose

        Flyover I actually worry about this quite a bit. Raise the minimum wage, and won’t prices just go up?

        It has more to do with the ratio of pay, and this is like the RE industry deciding you must live in an expensive house or condo or be homeless, and got law enforcement to enforce their will, zoning agencies too.

        It all really smacks of the Enclosure movement in historical England to me.

        And a huge problem is, we used to make things here, and we needed skilled workers. Draftsmen, machinists, you name it. Now it’s 3rd worlders and robots making everything.

        I honestly think Americans could make quality shoes, furniture, yadda yadda, starting out in their garages or in a co-op space, that could compete in price and out-compete in quality. But ya know, man, that barista job comes with free coffee and scones, and the last time I used tools I poked my finger, man, and it hurt! It totally screwed up my Nintendo skills for a week!

      • Check the facts. For example, a Chinese factory worker earns an average of $2/hr. compared to our minimum wage of $7.25/hr. This one fact creates a tremendous headwind for anyone of working age in America, and impacts the ability of many if not most to afford housing, etc. And, this wage gap limits the number of high-paying jobs even in S.F. or L.A., as it dictates that as much of the production, assembly, and work on products, occurs overseas using cheap labor!

  • WeDontMakeThoseDrinksNoMore

    The economy has much to do with so many Millennials living at home, but I also believe the rise of the Helicopter Parent has much to do with it as well. Many Millennials were raised with parents who shielded them from every problem, Mom/Dad confronting coaches, teachers, principals, authority figures whenever “MY CHILD” was “wronged”. God forbid “MY CHILD” might have to experience/cope with failure, rejection, etc. or learn self discipline, how to follow directions/rules. Celebrate the “whole child”, always in a “nurturing environment”! I knew one mother whose high school aged “CHILD” was interested in joining the military; when he went to his first meeting of an youth group that prepped kids for what to expect, Mom became upset when Son was told he must cut his long hair, “we won’t be going back”. Yup. I’ll guess if he ran away and joined at 18, Mom might attempt to enter boot camp to monitor drill instructors and ensure her “CHILD” was treated fairly.

    “Stay home for college”, “don’t go away, something bad could happen”, after graduation “stay here, its easier”. Parents can continue to protect/monitor their Princes and Princesses into adulthood. Kids get used to a lifestyle/neighborhoods and become “institutionalized”. I predict many will never marry/become independent. Eternal teenagers. Some will withdraw from society.

    I’m wondering if these kids will wake up day middle aged, bitter as hell because of all the life experiences they missed being “protected” by Helicopter Parents.

  • recent comments from a friend of mine who has been a mortgage broker for 20 years… no fed hike in December and shift to buyers market?
    ———————————————
    So Cal Home Prices dipped slightly in September from a month earlier, as the Housing Market enters a Traditionally Slower Season. The Median Price fell .7% from August to $435,000 in September and closed at about $450k in October. Although the economy has improving at a healthy rate, the real estate sector has been lagging because buyers have been slow to enter the market. Move-up buyers and first-timers across the board have been unable to afford new homes because of quick price gains and stagnant salaries as the economy comes back from the downturn. To entice buyers, government agencies are making home buying easier and more affordable in 2015, priming the market for prospective buyers. The emerging buyer’s market could mean the power to set market prices has shifted. With fewer buyers on the market, they will be the ones to set price expectations. It’s possible many buyers in fact believe prices will be coming down and therefore don’t feel the urge to move quickly – willing to wait for a better price. Sellers who got used to the meteoric price gains after the market crash may be surprised by the shift toward a buyer’s market. Sellers in the past have been in the driver’s seat, however that doesn’t appear to be the case any longer. Entering the market high and waiting for prices to catch up could be a very risky strategy.

  • Even without the millenials in the buying and renting market, housing prices and rents remain strong. This news is bullish for house prices long term. Eventually they’ll enter as either buyers or renters.

  • Nothing wrong with multiple generations living together–as long as they aren’t in an overcrowded situation. Older people have a sense of belonging and can babysit the third generation, thus freeing up their children from daycare payments. Shared cable, heat, property taxes, the ability to make big meals etc, all mean savings. How do you think the Asians save so much? Americans would be wise to adopt these styles of living.

    Multigenerational living is not a negative. Only so for the purveyors of consumer crap and the real estate agents.

    • Why is it that in our culture image means everything. You have to have a newer car, the women need yoga pants. Who gives a f***k that they cost over $100. Oh my God we need to move in with our inlaws or share a house with other family members. Oh the horror of it all! What will other family members, friends, neighbors, facebook friends think of this?

      • Not wanting the whole family live with you isn’t about what others think it’s about privacy and not having to compete with other peoples’ needs in your personal space. I don’t care what other people do or what apologists want to call it. It’s lowering the standard of living when you have to resort to sharing.

      • WeDontMakeThoseDrinksNoMore

        “Oh my God we need to move in with our inlaws or share a house with other family members. Oh the horror of it all! What will other family members, friends, neighbors, facebook friends think of this?”

        Maybe 20 years ago it might have been a concern, but nowadays, I think nobody cares.

        The bigger issue is upon reaching adulthood it is important for people to live independently from their families and learn responsibility; get out in the world, forge new relationships, budget, manage a household, etc. In other words, Grow Up. When one lives with/is supported by Mom/Dad/Relatives for an extended period of time, it can morph into Eternal Adolescence and unhealthy codependency, sometimes for a lifetime.

        Also, as Huh mentioned, most people want privacy/space. The Waltons was TV show; in real life, people can get on each others nerves in close quarters. I think some of these family living situations may become less like The Waltons and more like Grey Gardens Big and Little Edie as time goes by.

        I recall an old quote; “Only a Dead Bird Never Flies From The Nest”.

    • “How do you think the Asians save so much? Americans would be wise to adopt these styles of living.”

      Doubtful Americans are all about excessive dreams and glamour. It’s our culture, marketing has brain washed us this way. To cut back, is against our will. Retail therapy is king, I need a new Mercedes!

  • Alex in San jose

    Anecdotes:

    Met a guy at a coffee shop downtown who’s father is a design engineer (electronics) and can’t get a real job, can only get short term contracts for Cisco, but has to go through an Indian company so the pay is low. The guy himself knows a ton about plumbing and has done a ton of it, so while he’s devoting himself to small time politics for now, he’ll be OK.

    At Fry’s I got talking with a guy with a supergofast road motorcycle, and trained in biomedical engineering, anyone remember when that was hot? Now he’s a planner at a solar cell company that’s running 3 shifts.

  • One of those real estate blogs shows sale pending on a 3 bedroom condo in San Juan Capistrano for only 265,000 its about 1,100 square feet and about 31 to 40 years old. A lot of the current generation doesn’t care about high big since they are also in the tiny house movement which are houses even smaller than this. In fact in La and Oc in the 1950’s it was common for houses to be 800 to 1,000 square feet with 4 to 5 kids.

  • Dean,

    My recommendation is to refrain from drinking when posting.

  • This is a big generalization, but I think the parents of the millennials were too ignorant of what was happening to properly prepare their kids for a changing world. I believe Generation Z will do better on average. For me as a parent of two Gen Z-ers, that includes saying “yes” to the multi-generation household (inlaws will be moving in and paying through the nose for the privilege), as well as making the kids earn their general education units at community college, making sure they understand the difference between majors that pay (medicine, engineering) and those that don’t (paleontology, dance), and shutting the door on colleges that are remotely ivy league. The VERY LAST thing a good headhunter looks at is education, if they look at it at all. I don’t care if you went to MIT – are you pleasant to work with? Do you have the skillset to do the job well? Those are the only two things that matter.

    • Alex in San jose

      GenY are like the Lost Generation of the 1920s and the genZ kids are going to be the new Depression kids. They’re going to have some gumption.

      • And have the knowledge that credit and debt are not assets. Your credit score: the mark of the beast.

    • son of a landlord

      The alleged value of an expensive, Ivy League university is not the quality of the education.

      It’s that you’re surrounded by students from rich and powerful families. It’s your chance to network with the rich and powerful. To befriend students who will graduate to jobs in publishing, finance, politics, law, media, etc., and who will hopefully plug you into their powerful jobs network.

      • Which is great – we try to surround ourselves with well-off people now for that very reason. If we manage to get a free ride to the ivy league, I’m all for it. But that probably won’t happen. And I’m okay with that, too. In my eyes, money does not equal “success” as much as happiness does. I’d rather see my kids make $80k and be happy than make $250k and be miserable. Happiness is the goal, not a huge collection of assets. If they can manage both, fantastic.

        Reminds me of a tiger mom we know. She forces her kids to study every waking hour, including weekends, has numerous ivy league banners hanging on her walls, and boasts about her 7-year-old adding 3-digit numbers in her head. I just sigh, knowing they will likely be wealthy but full of resentment, with no fond memories of childhood.

      • Alex in San Jose

        son of a landlord — This. And more so, what a lot of people don’t know about is elite prep schools, some of which will actually let a few proles in. Andover, Deerfield, come to mind, there are tons of ’em, and the rich send their kids to ’em because if going to an Ivy together is bonding, then sing-alongs and sleepovers and Dead Poets Society type shit when they’re even younger is even tighter bonding.

        So among the rich it’s not just where did you go to college, but where did you “prep”.

    • I think it’s just too early to tell how millennials will perform, it appears to be tougher than generations before them. Do they have the skills to compete in this globalized market? When they wake up late in life from mom and pop’s house they will steer this economy no doubt. Luckily the gens before them will be working a bit longer until millennials do wake up. If they under perform, foreigners will just move in and replace them. A rude awaking! They better use their time at home wisely, otherwise they might as well be forgotten. Perform or get out.

  • son of a landlord

    I’m not sure what this says about a possible tech bubble, but the company behind Candy Crush was sold for $5.9 Billion: http://www.huffingtonpost.com/entry/candy-crush-maker-sold_563851ece4b00a4d2e0bb2e6

    • Alex in San Jose

      son of a landlord – I despise those games. Pure Pavlovian response wastes of time.

      Example: Wife of the guy I work for plays something like Candy Crush for hours a day. She wants to become a good artist. I’ve told her, spend that time drawing. Nope! She has “no time” for art, “no place to do it” (she could carve out a space even in this overstuffed-with-junk McMansion) and thus is frustrated all the time – because of “no time” and “no space” but every day, she’s acting like a rat in a Skinner box with that damn Candy Crush game, which she assures me, “No, this isn’t Candy Crush, it’s bladdayadda”.

  • Alex in San jose

    It appears I have gotten the attention of the bankers

    Now hear this: F.U.

    I will try to get this posted for the 3rd time now and you bankers can just suck it:

    Monopoly was originally called The Landlord’s Game and there are several fascinating articles online from good sources like The. Atlantic. I urge all to read them, as they are interesting and educational.

  • Hotel California

    Considering that some folks’ litmus for desirable is how everyone wants to live somewhere as defined by the scope of money willing to be spent on a property, it sure is interesting that the one place in the world most qualified by that very definition doesn’t offer mountains and beaches nor a “perfect weather” ruse. It also doesn’t offer a silicon themed neighborhood label.

    http://www.cnbc.com/2015/10/29/this-city-is-worlds-riskiest-for-property-bubble-ubs.html

    • Alex in San Jose

      Hotel – it’s because London is probably the #1 city for making money by waving money around.

      • Hotel California

        That’s the point, at the end of the day the sun or the beach take a backseat to more important considerations.

  • Is this a prelude to what is going to happen in SoCal???…

    http://www.talkmarkets.com/content/global-markets/going-nuts-in-sweden?post=77222

    Or is the definition of insanity?!…

    • Alex in San Jose

      Sooooo … the oligarchy in Sweden is thinking … “We’ve been f*cking the peasants too hard, how do we fix this? Oh, we could f*ck them harder, that might help!”

  • Well, today’s jobs report identified that almost ALL the jobs added were for 55 and older workers. Younger folks actually lost ground. Parent’s basements, here they come!

    https://confoundedinterest.wordpress.com/2015/11/06/october-surprise-avg-wage-growth-increases-to-2-5-percent-from-2-3-percent-not-in-labor-force-falls-to-92-4-million/

    • More bad news for millennials, they can’t even compete with their elderly parents.

      So the question is why are 55+ returning to job market, the kids returning home a burden to fiances? Millennials have a lack of ambition to grunt it out, cause they have mommy and daddy to fall on? Previous hiring trends of employing fresh college grads on the cheap didn’t work out, finding that experience counts?

      • Alex in San jose

        Example: A friend of mine, 55+, decided being self employed wasn’t working out that well after all. So he got a job at Vishay, “It’s easy when you personally know 4 out of the 5 guys interviewing you”, he told me. He describes the work as building Heathkits all day and loves it, and at a pay grade I could never hope for, and benefits.

        The older folks KNOW people.

  • meh. Would you be interested in some old codgers opinion of the hippie movement, circa 1968? Not really. Nobody has a crystal ball and we just express our own prejudices for the most part.

    I’m a millenial. We’re fine. Really. Our country has entered a second Great Depression. That may be what you’re noticing. If our country had a productive economy, we would participate in that economy. But it doesn’t. This country is designed essentially to wage wars, keep a few hulking corporations alive, and serve drinks to the people employed doing the first two things. Turns out the war-waging thing, the keep-my-zombie-corporation-alive thing, and the selling-Chinese-sh1t-back-to-ourselves, doesn’t require that many warm bodies to accomplish. And so: into the basement.

    • I think you’re right, it’s not really fair to blame Millennials when it’s the baby boomers who sucked out all the wealth of this country and leaving you guys with nothing but massive liabilities that can never be repaid while they continue to expect to live forever, even at the cost of millions of dollars just to get a few more months at the end of their lives. I also don’t think it’s wrong to say that a large percentage of Millennials are lazy f**ks either, it’s just easier for everyone to point fingers than actually suggest policy solutions. And there may not be any policy that is politically feasible to fix these kinds of things, that might just be the reality.

Leave a Reply

Name (*)

E-mail (*)

URI

Message






© 2016 Dr. Housing Bubble