Thursday, May 11, 2006

Home Equity Boomers' Salvation or Destruction?

From the AP:
Home Equity May Be Baby Boomers' Salvation

"It's no secret that baby boomers have not been very diligent about saving for retirement, but that doesn't mean they don't have assets. Many live in homes that have appreciated greatly in value in recent years as real estate prices have soared."

"Some financial experts believe that's going to be the boomers' salvation because they will be able to tap that home equity to help fund their retirements."

"Keene, a regional manager in private client services for San Francisco-based Wells Fargo & Co., added that baby boomers will have a number of options to "monetize" their homes, from buying a less-expensive house or condominium for cash and investing the proceeds, to reverse mortgage loans or interfamily deals."

"To be sure, there are mortgage experts who are skeptical of putting too much faith in tapping home equity to fund retirement."

""If somebody has no savings, the chances are they don't own a million dollar house free and clear either," said Michael Moskowitz, the president of the New York mortgage company Equity Now. "I think it's a bit of wishful thinking.""

"He added: "Without retirement planning, without a 401(k) or IRA savings account, people aren't going to be able to enjoy the same standard of living they had before retirement.""

"Chicaferro also cautioned that baby boomers shouldn't count on their homes appreciating as fast in the future as they have in the past decade."

""There's no guarantee that equity in the home is going to double or triple in value, so it's not a prudent thing to sit there and think it will happen," he said."

(This piece seems more like an advertisement than any kind of journalism to me)

Caveat Emptor!
Grim

38 Comments:

Blogger minutesfromNYC said...

Eggonomics? anyone?

5/11/2006 11:31:00 AM  
Anonymous Anonymous said...

What is the age range to be considered a baby boomer?

5/11/2006 11:43:00 AM  
Blogger chicagofinance said...

It's WWII vets coming home and having kids. So I think it is people born between 1946-1964.

I always seem to remember that my parents are just a bit older [born 1942], and I am a bit younger [born 1968].

Anon - to answer your question, I guess they are aged 42-60.

5/11/2006 11:47:00 AM  
Blogger grim said...

Beat me to it..

http://en.wikipedia.org/wiki/Baby_boomer

5/11/2006 11:48:00 AM  
Blogger chicagofinance said...

Actually 42 seems too young.

Maybe the cutoff is 1960-62?

5/11/2006 11:48:00 AM  
Blogger NJGal said...

My parents' house appreciated greatly and they think of it as something for retirement. Even with a drop in price normally they would make good money off of it. Thankfully they have more saved, however, they still owe on it b/c they've borrowed against it - college (I'm greatful) and other things they (and we, I'm just as guilty) "had" to have. I would bet a wad of money they're not alone on this one.

I just hope that despite the spending habits of many people of their generation, they also came from a time where savings, 401Ks, etc. were encouraged. Otherwise, it could be really bad in the future.

5/11/2006 11:55:00 AM  
Blogger Richard said...

the boomers for the most part will be ok if they bought a home a while ago. heck this recent boom was a once in a few lifetimes run up so boomers are one of the beneficiaries. lucky them. the rest of us johnny come lately youngins buying or just buying a house in the last 2 years? we have to pay ridiculous amounts of money just for a place to live and also fund other retirement programs (e.g. ira/401k). fair? no, but that's a 'free' market economy (snicker)

5/11/2006 12:07:00 PM  
Blogger minutesfromNYC said...

I just hope that despite the spending habits of many people of their generation...

What about the people ages 15 - 25 who have the "I want it now" mentality. That is what will really hurt in the future

5/11/2006 12:14:00 PM  
Blogger Metroplexual said...

I had a class in demographics where this was taught. A babyboomer is born betwen 1946 and 1964. My wife is a boomer (barely) I am an x-er (barely).

5/11/2006 12:19:00 PM  
Anonymous Anonymous said...

Lean times coming for those baby boomer ATM Bubbleheads.

Boycott Houses!!!


Boooooooyaaaaaaaa

Bob

5/11/2006 12:20:00 PM  
Anonymous Anonymous said...

interest rates up up up means prices down down down + ALOT!


BOYCOTT HOUSES!!!

Booooooooyaaaaaaa

Bob

5/11/2006 12:23:00 PM  
Anonymous UnRealtor said...

I've seen several retiree couples selling off their homes last summer to cash out and move to an apartment.

Many hit the market peak just in time last summer, and even those who missed the peak, and sell for $100K+ less this year, will still fund much of their retirement via a house.

Retirees not cashing out now are throwing away money. Some may love their home, but with no income, is that love worth throwing away $500,000 or more?

5/11/2006 12:26:00 PM  
Blogger jhawk92 said...

The date range for the boom varies a little for tail end from 1964 to 1968 depending on who you are reading.

I don't know if anyone else has noticed that reverse mortgages are getting advertised now. James Garner was in one I saw. I think Robert Wagner was in another.

Not sure how big an impact this will have on inventory, but we won't see the impact until really start to hit until 2008.

5/11/2006 12:31:00 PM  
Anonymous Anonymous said...

Listen the concept of your home providing PART of your retirement is not all bad as long as it has not been your cash machine. In all seriousness many people own large homes and will sell them and move into smaller homes thus providing them with extra cash, but they still need to have savings and a plan for when the employment income stops!!! So in short your home contributes to your retirement but it is not the whole thing, this is not an all or nothing type of thing.

5/11/2006 12:42:00 PM  
Anonymous Anonymous said...

Grim:

Thanks so much for helping to check some information about listings in the past.

Here is one I think I had seen it a while back with a much higher price tag at that time.

2276722

so please help to see whether it is a new listing or was it relisted. Thanks!

5/11/2006 12:42:00 PM  
Blogger Richard said...

the 10-year rate is almost at 5.2%. wow. most 'experts' didn't expect to see anything by year-end much past 5%.

5/11/2006 01:10:00 PM  
Anonymous Anonymous said...

Who listens to so called overpaid experts anyway?
BABABABABABBABABABABA
BOYCOTT HOUSES!!!

signing up for monthly slave payments gets old very very quickly.

Tell'em NO MAAS to RIPOFF HOUSE PRICES>>>

BOOOOOOOYAAAAAAAA

Bob

5/11/2006 01:46:00 PM  
Anonymous Anonymous said...

The ONLY shortage is of sanely Priced Housing!

BOYCOTT HOUSES!

tell those Baby bloomers its time to save some money outside the Housing slush fund. Lean times are a coming bloomers.

Pa pa pa pa pa pa PANIC!

Booooooyaaaaaaa

Bob

5/11/2006 01:56:00 PM  
Anonymous Anonymous said...

Gluts and Gluts and Gluts and Gluts of Overpriced RIPOFF HOUSES..

Bababababababa

Boycott Houses!

hhttp://www.rockymountainnews.com/drmn/real_estate/article/0%2C1299%2CDRMN_414_46 75068%2C00.html

Homes piling up
Foreclosures help bury metro area in unsold inventory

By John Rebchook, Rocky Mountain News
May 5, 2006
The number of unsold homes on the Denver-area market hit a record 29,045 in April, according to reports released Thursday.
Rising foreclosures were the driving force for the skyrocketing inventory, which is 19.2 percent higher than a year ago, experts said.
April typically sees more homes on the market as sellers try to unload properties during the summer school break, and the foreclosures - more than 4,700 in the metro area in the first three months of this year - added to the number.
"There's a glut of unsold homes on the market," said Doug Pierce, owner of Pierce Realty Co., a Metro Broker company. And that is extending the length of time to sell homes, he added.

This is coming your way NJ baby Blooming ATM housing Bubbleheads.

PApapapapapapapa
PANIC!

Boooooooyaaaaa

Bob

5/11/2006 02:01:00 PM  
Anonymous Anonymous said...

Don't bail these Baby bloomers out.

Ba ba ba ba ba ba BOYCOTT houses!!

Luck has run out Baby blooming ATM housing bubbleheads.

Boooooooooyaaaaaaa

Bob

5/11/2006 02:02:00 PM  
Blogger Bubble-X said...

This is an interesting post, Grim. We actually just posted a story on how up to 29% of homeowners have zero or negative equity. Check it out:

BubbleTrack.blogspot.com

5/11/2006 02:05:00 PM  
Anonymous Anonymous said...

Be a fool and Buy a house at Monthly Serfdom prices.

Think for once. Run the numbers. think!!!!!!!

It does not compute.

it does not compute.

BOYCOTT RIPOFF HOUSES!

Booooooyaaaaaaa

Bob

5/11/2006 02:13:00 PM  
Blogger chicagofinance said...

"Most homeowners don't have to sell; the new, lower prices will be set by those who have to bail out. They include not just investors but also owners who stretched their finances to buy a house. This year no less than 22% of Americans' $8.7 trillion in mortgages will reset rates--and the extra burden will be big. A typical three-year ARM will go from 3.6% to 5.6%, forcing a borrower with a $500,000 mortgage to pay an extra $800 a month in interest. Delinquencies are already rising rapidly. Since early 2005 delinquency rates have jumped almost 14%, to 2.5% for prime mortgage loans. 'The banks will be forced to take back a lot of properties and sell them for the amount of the loan,' says Mark Zandi of Moody's Economy.com. 'That will add to the already huge supply on the market.'"

5/11/2006 02:15:00 PM  
Blogger RentinginNJ said...

"Some financial experts believe that's going to be the boomers' salvation because they will be able to tap that home equity to help fund their retirements."

This sounds perfectly reasonable to me. Boomers can fund their retirements by selling their overpriced homes to the next generation who neither have the numbers to absorb the boomers homes or the means to pay for them.

5/11/2006 02:47:00 PM  
Blogger RentinginNJ said...

…'The banks will be forced to take back a lot of properties and sell them for the amount of the loan,' says Mark Zandi of Moody's Economy.com.

If the banks could sell the house for the amount of the loan, why wouldn’t’ the “homeloanowner” sell the house and avoid foreclosure? The banks will sell the property for whatever the market will bare. In many case, this will be less than the amount of the loan.

5/11/2006 02:53:00 PM  
Anonymous UnRealtor said...

"The number of unsold homes on the Denver-area market hit a record 29,045 in April, according to reports released Thursday. Rising foreclosures were the driving force for the skyrocketing inventory, which is 19.2 percent higher than a year ago, experts said."


Looks like a good time to "invest" in real estate.

5/11/2006 04:25:00 PM  
Anonymous UnRealtor said...

"This year no less than 22% of Americans' $8.7 trillion in mortgages will reset rates--and the extra burden will be big. A typical three-year ARM will go from 3.6% to 5.6%, forcing a borrower with a $500,000 mortgage to pay an extra $800 a month in interest. Delinquencies are already rising rapidly."


Complete madness!

5/11/2006 04:28:00 PM  
Anonymous Anonymous said...

An extra $800 a month in interest works out to about an extra $13,000 a year in gross income.

About a 20% raise if you are making $65,000 a year. I'd love to hear someone go into their boss and ask a raise because the ARM reset.

5/11/2006 05:52:00 PM  
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5/17/2006 01:08:00 PM  
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7/04/2006 09:38:00 AM  
Anonymous Anonymous said...

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7/04/2006 09:56:00 AM  
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