Baby boomers and the 4 million seriously delinquent loans – 10,000 Americans turn 65 years of age each day and this trend will go on for nearly two decades. Housing starts and completions reach record low in 2011.

The prospects of a housing recovery in 2012 seem unlikely as continued weak momentum carries over from the second half of 2011.  Globally, housing bubbles are entering into peak mania phases as hot money seeks a safe harbor for the short-term.  Back here in the United States, we can look at the cold hard reality that 2011 saw a record low number of single family completions.  The positive news is that this aids in lowering the overall housing stock and provides a stronger buffer for shadow inventory that will leak out into the market over the next few years.  A strong variable that is hard to factor in is this; we have 10,000 or so baby boomers that retire per day for the next 19 years and many will look to downsize.  It should come as no surprise that the Case-Shiller prices are now at post-bubble lows.  What does 2012 have in store for the housing market?

Record low number of housing completions

Home builders are first in line to register any demand for new homes.  This demand was not to be found in 2011.  First, new homes are more expensive and second, you have an enormous amount of shadow inventory that needs to filter through the system.  So with these forces at work we saw that single family starts were at a record lows coupled with a record low in single family completions:

housing starts

Now why is this trend continuing five years into the housing crisis?  One of the main factors is the lack of household wage growth.  The media seems to think (or push) a notion that the problems in housing are based on purely supply related issues.  The reality however is much more troubling in that the deeper issues in housing stem from major weaknesses with income and good employment growth.  Because of this we have seen a strong demand for lower priced homes and these are coming from the distressed pipeline:

distressed home sales

Source:  Calculated Risk

This is fascinating data.  What we are finding is a strong demand for distressed housing in many markets.  In markets that had the biggest bubbles surges like those in Nevada, Arizona, Florida, and California you see distressed sales making up over 50 percent of all sales.  In Las Vegas a stunning 72 percent of all sales in 2011 came from the distressed pipeline.  The good news is that there is demand for housing at lower price ranges.  The bad news is that prices continue to fall to find a closer baseline with household incomes.

What impact will baby boomers have on housing?

10,000 baby boomers each day turn 65 and enter the age-range of retirement.  We should get used to this trend because it will be with us for the next 19 years.  A large portion of homeownership comes from this group.  How many have plans of downsizing?  Keep in mind that many in this group own homes without a mortgage and bought prior to the housing bubble.  We also know that 4 million homes are seriously delinquent and part of the shadow inventory.  Of course not all baby boomers will downsize but with 10,000 a day retiring and such a large amount of shadow inventory, you have two more factors adding pressure on the supply side.

income by age group growth

Source:  Reach Advisors, Census data

Virtually every age group under 54 suffered an inflation-adjusted loss to their income.  First-time buyers largely come from the 25 to 34 group and the 35 to 44 group.  Both of these groups nearly saw a real inflation loss to income of 10 percent over the past decade.  It should then come as no surprise that the Case-Shiller price levels are now back to inflation adjusted levels last seen in 2000.  Keep in mind this is for nationwide trends and many regional markets are still largely in bubbles that are in the process of correcting.

So what do we have in store for 2012?  There are a few trends that will likely dominate the current year:

-Low housing starts supporting a process of lowering overall inventory

Shadow inventory coming online as the process is streamlined

-Continued price correction in higher price metro areas

-Stabilization in multi-family housing

-Federal Reserve continuation of devaluing currency and purchasing mortgages

The impact of baby boomers retiring and downsizing is yet to be seen but we still need to contend with the monstrous size of the shadow inventory.  Doesn’t it seem obvious that with 10,000 people hitting 65 each day for the next two decades coupled with our massive debt, unchecked banks, and gigantic shadow inventory that somehow housing will remain in a precarious limbo deep into 2012?

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73 Responses to “Baby boomers and the 4 million seriously delinquent loans – 10,000 Americans turn 65 years of age each day and this trend will go on for nearly two decades. Housing starts and completions reach record low in 2011.”

  • “we have 10,000 or so baby boomers that retire per day for the next 19 years and many will look to downsize. ”

    No, that’s not right. We have 10,000 Boomers turning 65 every day until 2031, a total of about 75 million. Many, many of them will not be able to retire, and will continue working and living in their homes until their last breath and the home is unloaded in an estate sale. A long, slow leak.

    • What makes you think they will “stay in their homes”? What is preventing them from selling their homes at a profit, and using those funds to subsidize and maintain their current standard of living? For most of these people, their homes are their savings. I see many “first time on the market in 50 years” listings here in the SGV. Baby boomers are trying to cash out before it’s too late. By the way, it’s too late.

      • “What makes you think they will “stay in their homes”? What is preventing them from selling their homes at a profit, and using those funds to subsidize and maintain their current standard of living? For most of these people, their homes are their savings. I see many “first time on the market in 50 years” listings here in the SGV. Baby boomers are trying to cash out before it’s too late. By the way, it’s too late.”

        The “current standard of living” for a majority of them has been obtained with debt, and, a prime source of debt has been the HELOC. Don’t know the exact percentage, but an enormous amount of Boomers still hold a mortgage at a relatively ancient age, compared to previous generations. The mortgage burning party is a quaint relic from the past.

        For me, proof that the Boomers are stuck in their chair (in the form of a MacMansion) after the music stopped is the situation in Florida. You would think that, with 10,000 a day turning 65, that literally millions would be flooding into the state to snap up the amazing bargains down there. Hell, an average home, and, I’m really talking average here, in Westchester, is priced around a half a million. You could buy three nice homes in Florida for that right now by trading down to sunny climes, but, it just isn’t happening. They’re all stuck up north with no savings, mucho debt, and having to work until the end. And, those are the lucky ones, if they still have a job that pays well. One third of Boomers have no savings at all, and will only have Social Security to live on.

    • You kind contradict yourself. You say that boomers will be forced to work til their dying breath (implying they can’t afford to retire) then say they will stay in their huge “nesting” house while they work to their dying day!

      Logically, if a person is elderly, they will down size ESPECIALLY if they are low on money.

      • Well, old people tend to stay put unless they really have to move, so, that’s another factor. Moving is a shock they can do without. But, in many parts of the country, their homes simply cannot be sold in a frozen market. I’m sure many are trying, but, hey, if there’s no buyer with good credit……….

      • I think you are misunderstanding his point. He is referring to the many baby boomers that can’t just sell their home and relocate because they are overleveraged on their home in Weschestwer either because of bad timing in purchasing, or using the equity via a HeLOC or perhaps a reverse mortgage and now are stuck like millions and millions of robbed Americans! The money doesn’t disappear, it only transfers so while Americans were robbed of their nest eggs and now are left bancrupt, some Goldman sacks banister is toasting with champagne!

      • They owe they owe so it’s back to work they go. Maybe the life insurance will pay off their homes!

        I know one who got a house in a fire trap of a forest mortgaged to $320K, can’t sell it for half that much, and works 1 1/2 jobs. Makes $70k/yr. Pushing 60 there is no way this pencils out….the last refi bought an Escalade that will wear out too before her death.

  • That also means 10,000 high paying jobs opening up every day for young people looking to buy homes and start families. 2 sides to every coin.

    • Unfortunately, the trend is to replace these folks with sub-contracted temporary employees who often don’t get benefits, and who work for much lower salaries than the folks who had the old-fashioned direct-hire positions. So probably no joy there.

      • Or simply outsource their jobs to third world and/or totalitarian nations.

        Then again, we’re well on our way to that ourselves, and if the U.S. left’s ambition to become China in terms of both freedom and lifestyle is to succeed, we must also pay the bulk of the population Chinese style wages to support the lifestyle of The Party’s chosen. So perhaps the precipitous drop in wages will simply continue here until outsourcing is cost equivalent with local labor.

    • “john
      January 23, 2012 at 7:14 am

      That also means 10,000 high paying jobs opening up every day for young people looking to buy homes and start families. 2 sides to every coin.”

      No John, it does not. Please refer to the chart in the article on “inflation-adjusted income growth” from 2000-2009 (before the first Boomer turned 65 in 2011): Baby Boomers only gained less than 2% income during that period. It was the previous generation that made the most gains in income. Everyone else dropped.

      You have to look at the average income of Baby Boomers to make any statements about “high-paying jobs opening up” when Baby Boomers retire. How many are self-employed? How many work part-time jobs, or in family businesses? How many are farmers, truck drivers, waitresses, taxi drivers, nurses, teachers?

      I again will state: R.E. prices, especially in California, will bottom out when they reach the Reagan-era R.E. boom of 1985. That was the year it started, and ended in 1990. I see prices drifting back there year by year…until that point is reached.

      So, expect to see 25%-35% further haircuts in equity. This will not end well, there is no “magic cure” for demographics.

      Another point: This also means, if they retire, 10,000 taxpayers going off the revenue income stream for state and federal government….while they are already is rapid decline.

      And starting to receive the FICA Trust Fund monies they paid in for 4+ decades…and the Trust Fund is stuffed with worthless paper….non-redeemable Treasury paper.

      So…what does THAT mean? Expect hyperinflation of currency, as Bernanke fires up the printing press and debases the dollar. Assets fall in value/or money is increasingly worthless…deflation/inflation, either way we are screwed.

      Bright side? The MIC goes broke…and the rebuilding of a real economy begins…painfully, slowly.

      • It is particularly nonsensical to claim that the SS Trust Fund is stuffed with worthless Treasuries, when Treasuries outside the Trust Fund are worth something. As the market seems to value US Treasuries, the SS Trust Fund is stuffed with valuable securities.

      • “It is particularly nonsensical to claim that the SS Trust Fund is stuffed with worthless Treasuries, when Treasuries outside the Trust Fund are worth something. As the market seems to value US Treasuries, the SS Trust Fund is stuffed with valuable securities.”

        farang is correct. What is in the so-called Trust Fund are not Treasuries. They are not negotiable debt instruments. They have no legal standing as debt.

      • “farang is correct. What is in the so-called Trust Fund are not Treasuries. They are not negotiable debt instruments. They have no legal standing as debt.”

        The so called “Special Treasuries” in the SS Trust Fund, like the marketable US Treasuries outside the trust fund, are backed by the full faith and credit of the US government. It is true that the Special Treasuries cannot be traded on the open market, but there is no legal standing of soverign debt securities. If the soverign is bankrupt, debt holders are SOL.

  • Or perhaps deep into 2032.

  • This here baby boomer won’t be down sizing, I live in a one-bedroom apt! If anything, I would be up-sizing….

  • Retirement? What a quaint concept!

  • “we have 10,000 or so baby boomers that retire per day for the next 19 years and many will look to downsize. ”

    Perhaps the downsizing trend will happen in other states, but not likely in California. With Prop 13 tax advantages where their tax valuation is a fraction of their homes’ actual market value, why would seniors move? They’ll just seal off the 3 bedrooms they’re not using so they’re not paying to heat and cool those rooms.

    • They can take their Prop 13 values with them to a new home.

    • There are very few pre 1978 owners. The taxes on recent purchases are quite high even though the price of the property may be down fifty percent there have been very few tax reductions. This is why all you anti 13 nuts are so wrong. There is no value until a home is sold and closes escrow. Until that time it is all pie in the sky paper fantasy profit. The whole purpose behind 13 was stopping the scam that because your neighbor sold their home for a large profit you need to pay more tax. As events since 2007 have shown that was a bunch of crap. Are they going to pay back the money collected on the inflated value that was never realized?

  • You know it is absolutely amazing to see the Pollyanna responses on this site. How many times do people need to get kicked in the face until they learn to stop doing the activity that causes them to get kicked in the face? I am not saying that it is the end of the world but the tulip bulb is not coming back anytime soon. Let it go…

  • I am seeing houses now in Venice and WLA for around $600K which is definitely lower than I have seen in the last few years. But since my main prerogative is financial security, I am opting to buy a 4 unit apartment bldg (living in 1 unit) and at least have a few thousand income – after all utilities and taxes. Can any house give me that financial security?. Of course, I know 3 tenants can be a pain but I can handle phone calls and complaints for a few thousand a month income or turn it over to mgrs. I spoke to a realtard who told me the main downside in buying a multifamily is that most owners have under-reported expenses to show a good cap rate. So, that seems to be the main risk, under-reported maintenance. thanks.

    • SOunds like you have a plan, but you may be underestimating the amount of time, money and energy that it will cost you to maintain the place. BEing a landlord is NOT easy. I know several, and some of them were forced to rent b/c they could not sell. Know that each month you will be putting a large chunk of the cash you collect away for future repairs, vacancies, insurances, taxes, and MASSIVE headaches dealing with all manner of crap. Good tenants are not easy to find. ANd you will not just sit back and collect cash, or have some manager do it cheap. Tread carefully.

    • Wise move. We were going to trade up but decided not to and looking for a 4-plex in OC instead. Even 4-plex prices have come down significantly. Some from $1M (purchased in 2007) to low $600k in some areas. We are still looking but not making a committment yet since the prices seem to be going down still. However, the few we had our eyes on sold for more than what we would have offered. We are wondering if the investment market is picking up.

    • Daniel, as an investment, houses are dodgy in good times. The problem is that they do not generate income. If the house price just matches inflation, then you take a 6% haircut on transaction costs right off the top. Add in mortgage interest, taxes, maintenance. Given those fixed costs, you may do well in a massive up market, but a flat or falling market houses are a poor investment.

      Rental property on the other hand can make sense. It is all in the details of course. Some people are really good at being landlords, others not so. My brother in law just got his High School GED at age 60. He has owned single family rental property all his life. He is a multi-millionaire. A great success story. His success does not mean you have sure fire path to riches. But, it does mean that it can be done. Spend as much time as you can with people who are successful landlords. Get their advice. I wish you all success.

  • Agree that some Boomers will have to continue working longer, however, one Stat. that everyone seems to over look is the fact that almost 40% of Home Owners in this Country own their home Free and Clear-No Mortgage. While another 20% have very low mortgages. This segment of boomers and retirees, while small at present is growing quickly and have been purchasing 2nd homes and cash flow properties as we speak. So don’t think for a minute that all of these Boomers are down and out and can’t sell their home for a profit in this market.

    • Exactly. We are going to over-correct in a few years and see a sentiment that housing is forever doomed when in fact it just needs to rebalance itself. Sometimes the people on this site seem like the other extreme of the “realtards” they always belittle.

      The answer is always somewhere in between. I think that if median home prices dropped $100k from where they are today, the market will be fine and many middle class families will be able to afford again, especially with low interest rates.

      Just keep saving as home prices continue to fall the next few years!

      • I’ve already lectured Mrs. ZigZag that the only way to make any money in this crazy era is to save it and stay out of debt. She looked at me quizically, which means it did not compute.

      • You don’t seem to understand the problem. “Most” middle class families already “own” a home. Most are tied to a large loan attached to that house. So, if prices drop as you say (I hope you meant drop TO 100,000. If the median went down that much, our entire financial system would be destroyed for some time), then almost the entire middle class would be trapped in severely underwater homes with no hope of escape until death. The only people who would benefit are young first time buyers and renters who want to buy, but, that would be a minority. Hey, as a renter, I’d be loving it, and, when I look at Reno or Tampa, I see what that looks like. But, we’d probably be in a depression for at least a few decades.

      • Mike M, you seem to have forgotten about walking away from the house and allowing the bank to foreclose. No borrower will be trapped unless they want to be.

      • Mike, the financial system is already destroyed. We have zombie banks that are artificially supported by the Fed and Treasury. How you ask? Borrow money at 0 % fed funds rate and purchase T-bills and make more that 0%. I think a three year old could make money with that business model. We will have to get back to the 100 plus year norm of housing growing at roughly the rate of inflation. In 1997, housing prices rose faster than the rate of inflation for the first time in over a hundred years…
        Ian, not all states are non-recourse states…

      • Mike,
        If you pay off your house over 30 years, there is no way you are trapped there until you die, unless you buy in your 40’s. And as your house will not drop to zero, even an underwater home will ultimately have equity over the long haul. So even if you take out a 30 year loan in your 50’s, you may still have equity before you drop. If you are employed, and can pay your mortgage, there is no financial reason why you cannot pay of an underwater home. Of couse you can walk away if you would rather invest in a better return.

  • it would be an interesting study, to figure out how many of the 3.6 million age 65-ers will actually retire, will actually sell a home, how many have mortgages, or for that matter, are possibly underwater, and how many jobs might be created in the process. Interesting also what this does to the underfunded liabilities of government pensions, social security as well. In 5 years we are talking 18M over 65. I think we will see a lot of seniors in poverty, as possibly 50% or more have very little savings and retirement income. Not to be morose, but they will join the 50M in poverty now, and the 18% who are really unemployed.

    • My bet is that there are way more baby boomers underwater or who don’t own than we imagine, as, many (like the rest of us) bought while the market was in their favor; or, re-borrowed to help out offspring. Multi-generational living will be a likely option.

  • We Don't Make Those Drinks No More

    SoCal is full of rapidly aging surfers/beach babes with meager savings, living paycheck to paycheck, squeezing by monthly to make the mortgage/rent payment, but most I know don’t seem worried…as long as the credit cards continue working. they can continue planning another getaway to Bali, another wine flight, another new car, as long as the monthly payments are manageable…

    Many seniors might not be able to downsize…their adult children have moved back home after job loss/financial fiascos, often with the spouse/grandkids in tow; I believe many of these adult “kids” that have landed back in the the nest will never move out of their seniors parents home; they love California, it’s the only way they can afford to stay.

    • We’ll see more and more multi-generational families living under the same roof. I think a lot of the baby boomers will actually gift houses to their offspring, it’s either that or the kids and grandkids are moving to ________ (fill in blank cheap with cheap Midwest state). Most young families in Socal do not have the resources to be financially independent. When you factor in housing, childcare, food, energy, healthcare expenses and then throw in many careers that don’t have much stability…it’s a tough road without any help. Times sure have changed!

      • 3's definitely a crowd

        Don’t forget that parents can transfer their CA Prop 13 status to one adult child as well. So, all these “boomer-rang” Echo-Boomers still living at home have an opportunity to save for a generous down payment, and also get a great deal on the family homestead as well.

  • Boomers need to get educated about retirement. Why live in poverty in the USA, when you can take your SS payment and live well in another country. You could live like a king in Mexico, Philippines, etc. with a modest income.

    • “You could live like a king in Mexico, Philippines, etc. with a modest income.”

      You could also end up a murder victim to drug gangs or muslim fanatics. Nice retirement plan.

      • The real problem will hit when the first wave of boomers become incapcitated and cannot do things like drive, feed themselves, etc. Just try living in West LA without a car and not able to walk more than a block. Sixty-five is not bad for most, but 80 is a new ball game. Who is going to take care of these tens of millions?

      • Contrary to what you may have heard on Fox News, the risk of murder by “muslim fanatics” in Mexico is zero, and pretty minimal most places in the world apart from obvious trouble spots.

        General street crime varies from place to place, but as a not-ostentatiously-wealthy retiree who minds their own business, your risk of being a victim of drug gangs or religiously-motivated murder rounds off to nothing.

      • Jake, excellent point!

      • @Kyle – Did I say there were muslim fanatics in Mexico? You can’t even match up the country with the problem. Duh – Mexico & drug gangs, the Philippines & muslim fanatics. Before you blow something out your ass again, get educated. Muslim fanatics are all over the Philippines. They have kidnapped and be-headed Americans, as well as Filipinos.

      • Kyle must have gotten his facts from Fox news. hahaha

        It’s pretty obvious that Kyle was asleep during history class, that’s alright, he’s just one of the 80%.

    • If you move away, stay healthy. You can’t get care without coverage in most t*h*urd world nations.

  • The article states that housing starts will decline, but my understanding from the news is that builders are looking to increase their activity. That will lead to even more homes on the market and a more drawn-out correction.

  • My sister, her husband and kids moved in with my parents who had refinanced their home several times over the years and were underwater. They are still underwater and I doubt that any of them will be selling or moving anytime soon.

  • Some of you posters are definitely ‘glass is half full’ kind of folks, lol. Don’t get me wrong, so am I, to a point. But why do you think all the banks are bleeding their shadow inventory out onto the market at a snail’s pace?

    Well the same will apply to boomers, whenever they are ready to sell. If there are already a few houses for sale within a couple of blocks of their home they will have a very tough time selling.

    Just because someone has a bit of equity doesn’t mean they are going to sell. What if they paid $100,000, missed the chance to sell for $275,000, and now have a home with a fair market value of $175,000, unless there are foreclosures nearby, then it’s $125,000.

    It is a lot worse out there than you people think. Houses are not moving. Once volume picks up, prices will drop a lot more.

    the only thing that will put a floor under housing prices is a significant rise in consumer and wholesale inflation, with follow on wage growth. and that last part, about the ‘wage growth’, doesn’t seem to be getting any traction so far.

  • Here is the future. Gauranteed. It is based on mainly anecdotal experience, but know that I came into contact with literally thousands of people over the years and had to get to know their backgrounds in detail as part of my job.

    The kids today cannot afford houses because they are not only broke, but in MASSIVE debt. I know because I just finished recruiting duty (for college grads), and unlike us older folk, who were just broke when we were young, these kids already owe a mortgage called a “student loan”. And it lasts DECADES, and God help them if they are foolish enough to let it go into default. Their financial lives are over as they know it.

    Boomers shot their wad. Between the HELOCs and the stock market that was supposed to go up forever, they are not only broke but in debt. And boomers do not get hired when they lose their jobs because no one will touch them due to health care costs. So they work at Wal Mart. They cannot downsize because ironically enough, they cannot afford to. They cannot move to FL or AZ and expect to get a decent job there. And they cannot sell their current house as they are most likely underwater. Ask the realtors there who is doing the buying of cheap condos in the sunbelt, and they will tell you Canadians with cash, or other foreigners. And besides, the young ones cannot afford to buy the boomer’s house anyway, nor their stocks and bonds. And you have the added bonus of the young folks already racking up incredible medical bills, believe it or not. All those Walgreens and such that you see being built are not just for old folks, but kids also. An insane amount of kids are on meds. More than you can you can ever imagine. Probably 25%. Again, this is just another monthly expense that will surpress their buying power indefinitely.

    So that leaves us in the middle, who are few in number and getting squeezed by profligate parents (boomers) and hopeless kids (Millennials). Apartments are being built again. But I fail to see how that helps the housing market. Even condos are not being built (try buying one, you’ll see why).

  • Looks like many of you are finally coming to terms with the maelstrom we are all engulfed in. Yes, some will be OK, but MILLIONS WILL NOT. And with the current generation blaming the baby boomers, there will probably be Auschwitz in America in 10 years. I pray to God I’m wrong, but it is a very real possibility.
    On the other hand, if we can already buy our own bonds by the trillion, who says we can’t print a quadrillion and keep this party going another twenty years?

    • You sound uneducated and ignorant. There will never be an Auschwitz in America, but deportation of illegals is justified. Settledown you have overloaded on Fox News. Turn off your TV and try reading widely, a book a day. Round yourself out a bit.

      • You might “educate” yourself by reading “The Rise and Fall of the Third Reich” or my pal Adolph’s book, “Mein Kampf.” All a totalitarian needs is a scapegoat. Never say never.

      • “…..but deportation of illegals is justified.”

        It would certainly be within the law. Leaving moral issues aside, does it make sense, economically? Not for the companies and farmer/ranchers that pay them year after year. That is why Bush and Obama have chosen to maintain an open border policy.

        Do we really want to shrink our population by 5% or so? That is really going to contract GDP. You haven’t thought that through very well, I’m guessing. We have a glut of several million houses in this country. Now, you’re proposing that we physically remove two or three million families.

        Do you have any idea what that would do to low end housing prices? I’m not exaggerating. You won’t be able to give away small starter homes that have the slightest wear and tear on them.

      • Sorry if I struck a nerve, but I’m very educated and don’t even have a TV. I have, however, read over 300 books and have been reading this blog for at least five years. I’ve also published two technical papers, but I don’t know the future. I do know that when times get tough, our leaders will go to any length to keep the empire going–occupy oil-exporting countries, confiscate gold from citizens, round up Japanese-American citizens. Don’t tell me you know the future if you haven’t been there.

      • Perhaps it’s you who need some reading assignments. The French revolution began with intentions of justice and spiraled out of control in a reign of terror that consumed victims at all social levels. The rise of fascism in Germany is another example of a modern, educated society that took a very wrong turn. Saying it can never happen again is silly — we are not immune from social upheaval of government excesses.

      • Why are you so sure it can’t happen here? The government and it’s respect for people’s rights? Give me a break, they passed NDAA for a reason, though I’m not sure whom exactly the target is to be locked away.

        The people? There are good people in this country, but there are also authoritarians and a lot of people who actively cheer the administration of cruelty and violence.

        By the way with your book a day thing – do you actually have a job? I mean I could see reading a chapter a day or an hour a day but ….

  • It’s true things are not going to get better with housing any time soon. I would say more people should be looking at a strategic default. I find its morality easy to defend, as it is simply playing by the rules; your mortgage contract said you would do something–not under all conditions, ever, but that you would do something and, like any contract, you are penalized if you don’t abide by it. So, you simply make the judgement yourself (probably with a lawyer) to see if it’s worth doing. It’s not illegal at all any more than stepping away from a bad stock that keeps going down.

    Personally, I’m about flat on my house now. It’s in an area that historically doesn’t go up or down much, so I’ve avoided this, but if I were underwater hugely yeah I’d look at ways to resolve that.

    Also be very, very careful hitting the 401k for anything at all. You will never get the time back to save up for it, and my understanding is that generally it’s protected should you be forced to file for bankruptcy.

    With average foreclosure taking 2-3 years now it’s not like you’ll lose your home that soon even if you did stop paying.

  • The newly minted college graduates are not getting jobs. The Boomers will have to work until they drop, if they can. But notice that first time Social Security filings are really taking off the last 3 years. I’m betting that the 35% of homes that are owned free and clear in this country are not going to be sold any time soon. Shelter is the biggest expense most have. So why risk this?

    As for the rest of the over 60 crowd? It’s either Mexico or under some bridge somewhere as most have little if any retirement money saved.

    • I love the irony. The Mexicans come here looking to make a better survival and you see the boomers heading off to Mexico to survive. Perhaps there’s a movie in this, we could call it “Trading Places”.

      • Some Canadian friends get angry when I tell them that 25 years from now the whole of Canada will be a U.S. territory. I see a future where both Canada and Mexico are annexed by the USA, probably under some premise of “national security”. The Empire needs the younger demographic of Mexico to pay taxes, and Canada’s plethora of natural resources to offset the ones lost to Chinese expansion.

    • If my spouse and I had to buy health insurance “on the street” right now, it would undoubtedly be more than our 530.00 mortgage.

  • Hey Doc, one thing I haven’t seen much discussion on is the effect of an earthquake in present day SoCal. After taking the brunt of the blast in ’94 I can’t slight anyone fir ditching. It’s a terrifying experince. Seeing how we’re closing in on 20 yeas and one is likely to happen in the next five years an impact study would be interesting. Give the existing woes, generational politics, insolvent insurance companies and banks, and deteriorating wealth of the country LA will no be able to rebound like it did last time. Thanks in advance.

  • I just read this latest blog, I was away from my computer for awhile. I just want to put my two cents in about moving out of the U.S. I am an expat living in the Philippines and feel qualified to set the story straight. Unfortunately, most of us (me included) get caught up in generalizations that we read or hear about from the media.
    I’ve been in the Philippines since 2004 and every time there is a typhoon, flooding, mudslides or murders, I get calls or e-mails from those in the states that assume it’s happening around me – it’s not! Sometimes I don’t even know about these events until I’m informed about them from the states. I can honestly say, that in the eight years I’ve been here, I haven’t had my home broken into (twice in the states), my car stolen (also twice in the states) nor have I been mugged, stabbed or shot at.
    My point is, don’t believe that everything you read is a summation of that country as a whole. The U.S. is as dangerous and in a lot of cases more so everyday.
    As far as the benefits of being an expat, it was the smartest move I ever made. This meant a lower cost of living (not a lower standard), affordable everything including a part of the U.S. I don’t miss – the health care and the costs that I could never afford in the U.S. The quality of doctors and hospitalization are right on par as well. So for the uninformed that submit there so called knowledge on living abroad and never had the balls to try it, don’t knock it until you’ve tried it.

  • Ben Mussolini,
    You’re just a Neo-wackjob starving for attention go do some volunteer work for hospice, you’ll feel better about yourself and learn something.

    Jason Emery,
    There are 15Mil illegals. They live mainly crowded in apartments with “anchor” babies, see LA for example, Santa Ana, Anaheim, San Diego, Texas, etc. There is no glut of homes, unless you feel only one family per home creates a glut. There are people walking the sidewalks shoulder to shoulder in crowds. Cars can’t find parking on the streets let alone carport or garage. Let teens and young adults go to work. Housing prices would come down where they should be. Return to the lifestyle of the 1960’s — a man could support his family on 18k a year and make payments on a 2000 sq. ft. home plus save for retirement.

  • I am a boomer, and have a large number of boomer cousins. Some of them probably own their houses free and clear, some of them may own their PRIMARY residence free and clear, but have a mortgage on a second home or on a “college condo” for their offspring. Probably all of them have over-relied on ever-rising real estate prices to fund their retirements, and I would say 100% of the boomers in my family have made lifestyle cutbacks of various kinds over the past 5 years.

    I live near an artsy community that attracted a lot of second-home owners and retirees. Prices held up pretty well until about a year ago, and then, as far as I can tell, SALES STOPPED. Zillow says that prices there have decreased 24% in the past 12 months, but I’m not sure how they calculate this, because NOTHING is selling. And think about it — nobody moves to this town to get a job. The tourism industry there is hurting badly. If you want to retire there, and you see that the prices are dropping 24% per year, you are nuts if you don’t hold off for another year to see if prices drop ANOTHER 24%. And if everybody waits, the prices probably will drop another 24% this year, as at least SOME of the people selling houses there will absolutely have to sell at some point.

    One question that I wanted to ask everybody is this: It used to be that insurance companies would refuse to continue to provide homeowner’s insurance for houses that were vacant for more than six months. NOW there are plenty of houses that fall into that category. Why doesn’t this seem to be pressuring people to MAKE A DEAL? It used to be that when you looked at Trulia or Zillow, most of the interior photos were of FURNISHED and OCCUPIED houses. Now, a huge percentage of the photos show either vacancy or what I would call “occupancy by transients” = mattresses directly on the floor, cardboard boxes and suitcases used as dressers, IKEA-style flat-pack furniture to the extent that the house is furnished at all.

  • “Blurtman
    January 24, 2012 at 8:28 pm

    It is particularly nonsensical to claim that the SS Trust Fund is stuffed with worthless Treasuries, when Treasuries outside the Trust Fund are worth something. As the market seems to value US Treasuries, the SS Trust Fund is stuffed with valuable securities.”

    “Particularly nonsensical”, is it? “Valuable securitites”, are they? Really, well, just a minute, here is your own correction:

    January 25, 2012 at 8:26 pm

    “farang is correct. What is in the so-called Trust Fund are not Treasuries. They are not negotiable debt instruments. They have no legal standing as debt.”

    The so called “Special Treasuries” in the SS Trust Fund, like the marketable US Treasuries outside the trust fund, are backed by the full faith and credit of the US government. *It is true that the Special Treasuries cannot be traded on the open market, but there is no legal standing of soverign debt securities. If the soverign is bankrupt, debt holders are SOL.*

    Since the US is over $100 TRILLION in debt obligations (bankrupt and printing fiat dollars like hotcakes), can you please exp[lain to be the *difference* between WORTHLESS and SOL, Blurtman?????

    If they are so valuable: YOU BUY THEM.

    I’ll settle for my cash returned to me RIGHT NOW, preferably in Gold or Silver, thank you very much.

    Nonsensical…….then like most self-proclaimed experts, you contradict yourself in the next two paragraphs.

    • Take a Midol and calm down. I did not say that the USA was bankrupt, and so there is no contradiction in my statement. You seem to have said that. What I did say was that as the market seems to value US Treasuries (undeniable), and as they are backed by the full faith and credit of the US government, as are the “Special Treasuries” in the SS Trust fund, then the Special Treasuries are also valuable securities.

      It is particularly nonsensical to claim that the money in the SS trust fund is gone, without stating the same about the money invested in US Treasuries. As the market values US Treasuries, the market believes the money is not gone. And so the same is true for the “Special Treasuries” in the SS trust fund.

  • A few days ago I was listening to a neurosurgeon on a radio program trying to reconcile the reality of an aging population with his humanitarian instincts. He had come from a meeting in which patients over 70 were referred to as “units” by our government. A topic of discussion was the need to administer “comfort treatment” only to “units” of an advanced age. In short, keep ’em from wailing too loud while
    they’re dropping dead. We have voted ourselves social benefits that are not affordable and the couple of workers who are saddled with providing for one retiree are feeling the pain. Kicking the can down the road is only possible if you’re not in a wheelchair or leaning on a walker. We have some very tough decisions to make, and ignoring them is about as effective as pretending termites aren’t destroying your house.

  • I rent a 4000 square foot home in Cowichan Bay with panoramic ocean views because. The house is assessed at $568,000 and the owner wants to sell it for $700,000. Prices are too high for this area. I can’t own this house for my $1600/mo rent. I love the freedom with renting. I don’t have to pay taxes or fix anything. Looks like I am going to have tons of homes to choose from. Oh ya. Did I mention that owning my own home doesn’t give me the high that most people get from owning their front door. It just doesn’t make financial sense to buy a home.

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