Millennials can't buy homes due to horrible savings habits and student loan debt. Do prices have to come down?

centro does it better wrote:

All you Bernie fans think we need to attack the free market with a hacksaw to equalize everything. If that's not communism, I don't know what is.

I'm all for it then.

TAA is correct as usual. Millennials in my hometown have no problem buying homes. In Seattle however some Millennial couples who both have decent jobs have given up on ever owning a home without moving back to the Midwest. Many Millennials feel entitled to live there anyway, even though they work long hours to live in a crappy apartment (if not parent's house) and make fun of "flyover" states where they could actually have a life.

When I graduated from University, I had $4,000 debt at 8% interest for a degree from a well known state university (top-20 nationally ranked Computer Science program and Engineering school) that cost about $20,000 total (including room and board) over 4 years.

I think the problem with student loan debt today are due to changes in the law in the 1990's (changes that allowed the banks to collect more federal money while completely transferring the risk to the students), and changes in motivations for universities to earn more money, by raising the tuition fees to the maximum students can federally borrow, rather than educate students.

I have two suggestions:

1) Role back the student loan laws to what they were before the 1990's.

2) Who says you need to buy a home?

Ok son

rekrunner wrote:

. . .

1) Role back the student loan laws to what they were before the 1990's.

2) Who says you need to buy a home?

The government, actually. Or very nearly requires it. Direct and indirect subsidies to home ownership is BY FAR the greatest welfare scam going in America. If you buy into it you lose out big time.

The Government Actually wrote:

rekrunner wrote:

. . .

1) Role back the student loan laws to what they were before the 1990's.

2) Who says you need to buy a home?

The government, actually. Or very nearly requires it. Direct and indirect subsidies to home ownership is BY FAR the greatest welfare scam going in America. If you buy into it you lose out big time.

So if you make a ton of cash in real estate how is that a scam?

Hahah nope wrote:

The Government Actually wrote:

The government, actually. Or very nearly requires it. Direct and indirect subsidies to home ownership is BY FAR the greatest welfare scam going in America. If you buy into it you lose out big time.

So if you make a ton of cash in real estate how is that a scam?

It would not be if the government would simply stay out of the business of "incentivizing" one investment over another. But as it is - yeah, pretty much a massive middle and upper class welfare scam and a disgusting government intrusion into what should be a private decision.

HardLoper wrote:

In Seattle however some Millennial couples who both have decent jobs have given up on ever owning a home without moving back to the Midwest. Many Millennials feel entitled to live there anyway, even though they work long hours to live in a crappy apartment (if not parent's house) and make fun of "flyover" states where they could actually have a life.

Yes, I've always believed that demand in the form of youngsters wanting to live here whatever the cost is more a factor in the rising cost of houses/apts than is the "tons of high-paid tech workers" theory. I've seen some apartments whose income requirement is 1/2 of rent (before taxes!), which shows that there are plenty of people willing to shell out more than 1/2 of their after-tax income towards housing. Hardly anyone in the Millenial generation wants to live in suburbs because the burbs don't have as many cool places to take Instagram pics or surf the web in coffee shops or whatever.

The Government Actually wrote:

The government, actually. Or very nearly requires it. Direct and indirect subsidies to home ownership is BY FAR the greatest welfare scam going in America. If you buy into it you lose out big time.

You mad bro?

Finisher Medal-------- wrote:

TAA wrote:

There's plenty of cheap places with good jobs. Columbus, Indianapolis, Memphis, Cincinnati, Louisville, etc...

Good god, who would actually choose to live in any of those places.

I think the same thing about NYC or Chicago

Haha I didn't say I wouldn't visit them! It could happen! =)

Anything purchased by debt financing will eventually deflate in the upcoming asset implosion. Buying with debt is simply moving demand forward. The Federal Reserve going back to Greenspan have done everything possible to inflate asset prices, including real estate and stocks, and the debt which supports those assets. We are about at peak debt now and there is nowhere much to go with ZIRP (0 or low interest rates) available to the financier class. Real estate prices will spiral with every Boomer lowered to to his grave, but it will happen much sooner. Any asset which is also a liability for another party will come to the same end. The coming-of-age baby boomer demographics, two-earner households and debt explosion largely brought about "economic miracles" of the 80s/90s.

I don't blame Millennials for not buying into this Ponzi. However we will see who gets the value of the asset: the kids ./ grandkids now in the basement or

the hedge fund / private equity hoodlums with reverse mortgage schemes

senior / assisted living hellholes

casinos

doctors / Big Pharma / Healthcare

property taxes or all tax collector public entity thieves for that matter

Same goes for tuition prices. If there was no government loans or backing / bailout of any loans, and the borrower could default on the debt like any other debt, then the tuition would likely plummet by half in order to fill the seats. Funny that one can buy a Big Mac on a credit card and puke it or sh-t it out 5 minutes later and then default on the debt or discharge it in bankruptcy, but can't do the same with student loans. There are two sides to every deal, even bad deals. College or lender needs to have their own skin in the game and bear the responsibility of their diligence or lack thereof. Because debt money spends the same as cash (but unlike cash has to be paid back with interest), the college tuition is "what the market can bear", and that market includes borrowers, even foolish or misinformed borrowers. The cash buyer has to (or chooses to) compete with those buying with debt.

I will save the history of why a dollar in 1913 (creation of Federal Reserve Bank) is worth about 2 cents today for another post, but in general the further you are away from where the actual dollars are emitted the lower the value of the dollar, from either historical basis or current basis. (i.e. for the latter: you cannot compete with Goldman Sachs to finance and manipulate tankers / prices of crude oil; you cannot compete with JP Morgan when they naked short the silver market.

Is is just astonishing that none of the the articles I ever come across in the mainstream media concerning the minimum wage - either pro or con - ever raise this issue. What could a jr./ sr. in high school with a most available jobs say in "the bad old mid/late -70s" for example, buy versus his counterpart today? Most I knew could easily buy 5 year old cars for cash.

The best and only thing which should have been done in 2007-2009 is let every TBTF crash without a bailout. Oh, with regard to the TBTF bailouts what economic / political "-ism" might that be? Its all on your debt tab now, Millennials. My advice is to get off the economic grid in any / all ways possible or amass the political will and power to "Ctrl-Alt-Del" the debt - all of it.

@State of Bankruptcy

IMHO I think the only ones hurt by low interest rates are senior citizens. Low interest rates were to help spur on the economy in a fragile state. It is (kind of) working. Relatively speaking the US is the most attractive place to invest, lend, do business, move, pay taxes etc because of a lot of our public policies. A lot of industries are booming and are healthy. If they continue to do well the Fed will raise interest rates. This would be a good thing because it means the U.S. economy is doing well.

Take auto for instance. This is cyclical by nature but there is a lot of evidence to suggest the industry is health. We have more humans living in North America than ever before and we still aren't near peak levels for sales. Many big auto companies balance sheets have been cleaned up and onerous costs like pensions have been eliminated. Management teams have rationalized capacity in a lot of their factories and are improving earnings.

https://www.google.com/search?q=auto+saar&espv=2&biw=1920&bih=995&tbm=isch&source=lnms&sa=X&ved=0ahUKEwjL_vOv64fNAhUSRlIKHSz8BlAQ_AUICSgE#imgrc=vXC0EKFG8JRZsM%3A

If you buy a car with a reasonable (emphasis on reasonable here) loan how is that destructive to the economy? Most people don't have the cash to put up and you can use funds to buy equities or other assets that don't depreciate.

Back to housing we are no where near the peak:

https://www.google.com/search?q=shiller+home+price+index&espv=2&biw=1920&bih=995&source=lnms&tbm=isch&sa=X&ved=0ahUKEwivkNXc6ofNAhULIFIKHWQeBQkQ_AUIBigB#imgrc=glqRvLvghdks3M%3A

I'm not sure how you can reasonably argue we are going to get back there any time soon. Also this hasn't really been that inflationary of an environment since 2008

http://www.reuters.com/article/us-usa-fed-beige-idUSKCN0YN5JD

we are at like ~1% - 2% per annum.

jamin wrote:

Yes, I've always believed that demand in the form of youngsters wanting to live here whatever the cost is more a factor in the rising cost of houses/apts than is the "tons of high-paid tech workers" theory. I've seen some apartments whose income requirement is 1/2 of rent (before taxes!), which shows that there are plenty of people willing to shell out more than 1/2 of their after-tax income towards housing. Hardly anyone in the Millenial generation wants to live in suburbs because the burbs don't have as many cool places to take Instagram pics or surf the web in coffee shops or whatever.

After hitting up all the hip microbreweries, microcreameries, microroasters, and high-end American "experimental" restaurants in Portland last weekend, I got an ice cream cone and coffee from McDonalds and it hit the spot like nothing else, for $1.79. It really makes you think!

Not black but blanc wrote:

Millennials can't buy homes due to horrible savings habits and student loan debt. Do prices have to come down? Plus when interest rates rise, it has two effects: 1) home prices go down as demand for owning decreases due to increased monthly mortgage payments 2) if you're a current landlord it's probably not a bad deal because more people will continue renting so landlords will stay happy

See Piketty's book on the rentier society.

Finisher Medal-------- wrote:

Then why did we bail out the banks for creating crap mortgages. Where was your laissez faire attitude then. Socialism for the rich, rugged individualism for the poor.

We didn't bail out the banks for creating crap mortgages. We bailed them out flr the poor and the middle class. How are some of you so strongly opinionated and so strongly incorrect???

in the long run housing prices have to move in some sort of tandem with wages. There are a lot of local and shorter term exceptions to that general rule. I am not following the market closely enough ti know what the present trendlines are

sayer of you mad bro wrote:

The Government Actually wrote:

The government, actually. Or very nearly requires it. Direct and indirect subsidies to home ownership is BY FAR the greatest welfare scam going in America. If you buy into it you lose out big time.

You mad bro?

No. How about you? How are you feeling today?

Mr. Obvious wrote:

in the long run housing prices have to move in some sort of tandem with wages. There are a lot of local and shorter term exceptions to that general rule. I am not following the market closely enough ti know what the present trendlines are

May be being propped up by foreign investors and others