"The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,"

[Gpond]

"The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,"

The study, "The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble," analyzed the wealth holdings of families headed by people ages 45 to 54 and 55 to 64 in 2004 and projected their wealth in 2009. The findings are presented by income quintile under three scenarios: house prices remain at November 2008 levels-the latest data available, house prices fall by 5 percent from November levels, or house prices fall by 15 percent. In all three scenarios, the vast majority of these families will lose a substantial portion of their net wealth in 2009.

The report projects that in 2009, the median household in the 45 to 54 age cohort saw its net worth drop by more than 45 percent since 2004, to just over $80,000 (including home equity). For early baby boomers, those between the ages of 55 and 64, the losses were not quite as steep but still came to 38 percent of net wealth, with the median wealth falling to $140,000, approximately 80 percent of the price of the median home. Nearly 30 percent of late baby boomers will need to bring cash to a closing to cover their outstanding mortgage and transactions costs.

more here: http://www.cepr.net/documents/publications/baby-boomer-wealth-2009-02.pdf

 

[ziggy29]

Based on this, I guess "young dreamers" looking in vain for a job will have to look a little while longer, because this would seem to indicate that most of the boomers won't be retiring any time soon.

 

[Gpond]

The credit bubble is flushing everything.

I think they are basing these numbers with very rosy forward projections:

house prices remain at November 2008 levels-the latest data available, house prices fall by 5 percent from November levels, or house prices fall by 15 percent

I know housing around my area has fallen more then 15% since November. Heck, they can't even move $70K houses for $100 around here.

 

[Bikerdude]

Based on this, I guess "young dreamers" looking in vain for a job will have to look a little while longer, because this would seem to indicate that most of the boomers won't be retiring any time soon.

I guess the good news is they will continue to pay SS & Medicare taxes.

 

[ziggy29]

I guess the good news is they will continue to pay SS & Medicare taxes.

Funny you mention that, because some cynics have claimed that the real motivation for Social Security was that younger folks needed the jobs the geezers wouldn't give up, so if we could just bribe the geezers into retiring...

 

[REWahoo]

... so if we could just bribe the geezers into retiring...

I did. Pay up.

 

[ziggy29]

I did. Pay up.

Apparently, it worked...

 

[MichaelB]

Funny you mention that, because some cynics have claimed that the real motivation for Social Security was that younger folks needed the jobs the geezers wouldn't give up, so if we could just bribe the geezers into retiring...

Define geezer...

 

[Bikerdude]

Funny you mention that, because some cynics have claimed that the real motivation for Social Security was that younger folks needed the jobs the geezers wouldn't give up, so if we could just bribe the geezers into retiring...

You can't have it both ways.. unless you find a way to get the "boomers" to drink the kool-aid.

 

[Bikerdude]

Define geezer...

If you have to ask, you probably are one.

 

[MichaelB]

If you have to ask, you probably are one.

Crap!

 

[Frugality_of_Apathy]

You can't have it both ways.. unless you find a way to get the "boomers" to drink the kool-aid.

I have a plan with no kool-aid required.

Deathgrip on your job, and refuse to go home?
Face the qualified unemployed slob , in thunder dome.

 

[CuppaJoe]

Funny you mention that, because some cynics have claimed that the real motivation for Social Security was that younger folks needed the jobs the geezers wouldn't give up, so if we could just bribe the geezers into retiring...

I did that but no new job opened up for a whippersnapper. Geezer tax! Watch out, we're a voting bloc.

 

[Amethyst]

All along, I'd thought the "vast hordes of real-estate wealth" idea was based on the rise in value of people's parents' homes, which the children have been and continue to inherit at a stepped-up value basis, so it is basically tax-free moolah. So someone's parents' home, which the parents bought for $15K in 1962, is only worth $300K now instead of $500K? Still seems like unearned (by the children, anyway) wealth to me.

Honestly, I don't feel any poorer because the place where I live is worth less than it was a couple years ago. Sometimes I feel poorer because of what it costs to live here, though.

 

[Bimmerbill]

Hmm. I've seen some deterioration in my home value (maybe 40-60K, tough saying since I ain't selling). But, I've seen over 75K loss in my 401Ks, so not feeling the real estate wealth pinch.

 

[HFWR]

My 401k is down more than my house is worth...

 

[ziggy29]

My 401k is down more than my house is worth...

My retirement accounts are down by double the value of my house.

 

[Gone4Good]

My retirement accounts are down by double the value of my house.

My investments are down double the value of my house after my house declined by one third . . . oh never mind.

 

[audreyh1]

We live in a nice motorhome instead of a house. We could have bought six more fancy diesel pusher motorhomes for the amount that evaporated from our investments.

Audrey

 

[W2R]

\For early baby boomers, those between the ages of 55 and 64, the losses were not quite as steep but still came to 38 percent of net wealth, with the median wealth falling to $140,000,

Sometimes I forget that those of us posting on the ER Forum are atypical. It is difficult to even imagine being in the 55-64 year old category, with wealth of only $140K.

 

[REWahoo]

It is difficult to even imagine being in the 55-64 year old category, with wealth of only $140K.

I once thought as you. Mr. Market has "improved" my imagination substantially.

 

[Bikerdude]

Sometimes I forget that those of us posting on the ER Forum are atypical. It is difficult to even imagine being in the 55-64 year old category, with wealth of only $140K.

You could have 140K in wealth but also have a 60K pension with cola and health care included. Or be 65 and have 140K, 30K in SS, and medicare. Not great but doable IMO.

 

[HFWR]

My investments are down double the value of my house after my house declined by one third . . . oh never mind.

We live in a nice motorhome instead of a house. We could have bought six more fancy diesel pusher motorhomes for the amount that evaporated from our investments.

Audrey

Ouch! That'll leave a mark...

 

[Independent]

This is in the summary" ​

Finally, these projections should make clear that homeownership is not always an effective way to
accumulate wealth. Homeownership during a housing bubble was a route toward losing wealth, not
accumulating it. While typical homeowners cannot be blamed for not recognizing the bubble, the
economists and policy professionals who designed policies that pushed homeownership certainly
can and should be blamed.
It was possible to recognize a bubble at least as far back as 2002 based on the sharp divergence in
house prices from their historic trend. The fact that so many economists and policy professionals
failed to recognize and warn of this bubble had enormous consequences. Unfortunately, the people
who listened to these experts are likely to suffer the consequences of the experts’ failure, rather than
the experts themselves.

I don't agree with the extreme view of "it's all the experts' fault", real people still made decisions. Yet, lots of normally rational people found it easy to believe that the stock market was going to return 10% forever, or that house prices would go up much faster than inflation. To the extent that this made them comfortable about their financial planning when they should have been worried, the bubbles did reduce wealth accumulation.

(Note that at least one of the people who wrote this study -- Dean Baker -- really did argue that house prices looked like a bubble back in 2002.)

 

[W2R]

You could have 140K in wealth but also have a 60K pension with cola and health care included. Or be 65 and have 140K, 30K in SS, and medicare. Not great but doable IMO.

I believe the $140K in wealth includes any home equity. I still find it hard to imagine (even with SS, medicare, AND pension) having accumulated only $140K, including home equity, at age 55-64. None of these fixed income sources are written in stone these days.