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The Housing Bubble and the Baby Boomers
United States
Housing
Posted by: Michael Dudley
12 June 2007 – 2:30pm
The troubling ratio of mortgage debt to housing value is going to pose a problem for millions of baby boomers, who are set to retire with almost no equity, according to Dean Baker of the Center for Economic and Policy Research in Washington, D.C.
“The quarterly Flow of Funds data from the Federal Reserve Board show that homeowners are still taking on mortgage debt at a healthy pace even as their homes have largely stopped appreciating in value. Homeowners increased their mortgage debt at a 5.4 percent annual rate in the first quarter, adding debt at an annual rate of $510 billion. This is rate of borrowing is down from the 9.3 percent growth rate in 2006, but it is considerably more rapid than the 2.0 percent rate of house appreciation reported for the first quarter.
As a result, the ratio of equity to home value continued to fall…This drop in the ratio of equity to value is especially disconcerting given the country’s demographics. With much of the baby boom cohort at the edge of retirement, it would be expected that the ratio of equity to value would be near record highs.
The long-term problem is that tens of millions of baby boomers are approaching retirement with relatively little equity in their homes and almost no assets outside of their homes. Their retirement income will be almost entirely dependent on Social Security.”
I think much of the the wealth that baby boomers like to show were the result of many HELOCS. Of course there will always be a segment of wealth and that wealth will be transferred to the children. I think you are over estimating the wealth of the baby boomers. But you have to hand it to them they did live in the moment and take take take. I’m personally right on the boundary of boomer Gen X technically speaking but I consider myself an X’er. If you saw Soundgarden at the Offramp (small club) in Seattle in the early 90’s you pretty much belong to Gen X.
