From a twenty-something..

[anxvariety]

Just wanted to say something about twenty-seomthings.. I’m 26 years old, and most of my friends(approximately 40 that are around my age)are college graduates, with probably about 30% of those not being graduates.. all of them are employed at different rates with the lowest probaby making $10.00hr and the highest being a little over 100k a year..

The one thing that is almost completely common between all of these people that I know between the ages of 20 and 30.. is that none of them have any money saved.. Yeah you heard me, as far as I know only 2 of the40 have money in the bank(that isnt designated for this months bills.. I know because I talk to all of them.. I am one of those 2.

I just wanted to give you an idea of whats going on in my age bracket.. Alot is said about current homeowners and how much they are in debt etc… but alot of people between 20-30 are not homeowners yet and they have debt on all kinds of stuff from school to hobbies to entertainment…

I have NO IDEA, what generation is going to bail out all the people in the housing market or the resulting economic crash from this bubble.

Help is not on the way…. start printing more money!!

[4plexowner]

The boomers don’t have any money saved either.

The average 401K has $50K in it and about 33% of them have less than $35K.

One of the explanations for the lack of boomer savings is that they are relying on the equity in their real estate for retirement.

But if all the boomers are going to sell their houses when they retire, who will buy them?

Is there a demographic group large enough to buy all those homes? As anxvariety points out, it won’t be the 20-somethings who are living paycheck-to-paycheck.

Won’t a massive boomer selloff result in declining prices?

[anxvariety]

I just want to add.. that the paycheck-to-paycheck mentality of my peers is scary.. but what really scares me, is that to them there is no consequence… the fix for them is to get more credit.. or hope that they get more hours at their job?? Even though they are living this way – the next thing I expect to hear from them is – “Hey I just bought an Escalade and a dirtbike!”.

The thought of savings is completely foreign to them…

Do any of you older folks understand how many people my age 20-30 live with their parents? I havea lot of friends that do.. and they’re not drug junkies either.. I believe it’s just become part of this generation… Why or what changed? I do not know.. That’s brings up another issue that scares me… I know some people my age don’t understand how bad their parents are actually doing.. these friends parents (and this is mostly a guess) are living off their refinances.. and are cash flow negetaive each month.. I don’t think it’s very hard to tell if someone is losing money each month.. they have lots of credit cards and things that are obviously beyond their means..

As my dad says… “things are just starting to turn around for me!!” (listen to that over the last 20 years and we’ll see if you believe that they are)

[Stu949]

I just want to say that anxvariety is SO right!

My fiance and I are 26 years old. We’re both college grads, and we’re working professionals (she is a CPA). We make a combined $150,000 a year gross – we’re not “typical” 26 year olds. Most of the people we know around our age (mid 20s and early 30s) are in enormous debt. Only 5% of those friends own a home/condo; however, their loans are adjustable. We’re starting to hear from those friends that the payments are getting tougher to make.

At any rate, all the others either live 8 to a house or still live at home. Among these individuals, most are college grads who work full time (the lowest paid is $40,000 a year). I guess my point is that none of these college grad/working professionals are or will be buying a condo any time soon. This is coming from the top 10% of wage earners for this age group. In fact my fiance and I are considered “wealthy” by government standards, as we are taxed heavily because we “make” too much. We can’t buy a home, but we’re too wealthy.

I’m not trying to whine and complain here; I’m just trying to reiterate what anxvariety said above. There currently isn’t, and there won’t be buyers for the starter market until something changes. The baby boomers never had to pay 60 to 70 percent of their income on housing, so why should the indebted generation of the twenty-somethings have to… Anyone who spends that much of their income on housing is the bigger sucker! There are still many out there; however, they’ll get burned with the rest. I’m not going to reward and/or bail out the suckers who made horrendous financial moves by buying a house they couldn’t afford. I’ve worked too hard to be indebted for the next 15 years in a one-bedroom dump. I look around at my friends and others (the people anxvariety referred to) and I see that they won’t be in any position to buy my piece-of-crap condo if I were to buy one at this juncture.

The people who think the twenty-somethings are going to buy their starter home some day are in for a rude awakening. It won’t even be a matter of making the decision to buy, the Federal Reserve is already talking about reigning in the rampant, exocitc mortgage market. After all of the foreclosures we see in the next few years, even people like my fiance and I (with 770 credit scores) will not be able to get a loan. Oh well, I don’t think real estate will see significant appreciation for next 15+ years.

[sdduuuude]

I’m not so sure this hasn’t always been the case with 20-somethings.

[powayseller]

Won’t a massive boomer sell-off as they cash in their retirement mutual funds over the next 30 years, result in a price drop in equities?

[powayseller]

I was broke the first 5 years out of college. Between catching up on dental work, paying student loans, getting a car that wouldn’t die on the side of the road, saving for a downpayment on a house, getting work clothes, some furniture (thrift shop and folding chairs), and then getting ready for babies and working part time for 3 months and then just quitting my job….we were so broke! Isn’t that how it’s always been for people starting out? As a frame of reference, I am 44 and graduated from college in my late 20’s in 1988.

My parents also started out poor. They slept on the floor and rented a studio apartment until my dad finished medical school in his early 30s. My husband’s grandparents were Iowa farmers who were so broke, they never went out to eat. They just couldn’t afford it, despite their large farm.

I’m wondering if the younger generation really is worse off than anyone starting out. It’s normal to struggle for many years, to live with several people or at home. That’s how it was for me also, 15 years ago.

The only thing different now is people’s expectations, and their sense of entitlement. I make my kids buy most things they want, because they really need to learn delayed gratification. This is very important. Learning to wait for things. Media has become too provocative, sexual, materialistic, and people want everything now and think they should have it. They take on more debt than they should, instead of saving and waiting for it.

Maybe a lot of these people shouldn’t live in an expensive city like SD, or they should be satisfied to live 5 to a house, or move back in with mom or dad until they can afford to be on their own. Living on your own in SD is a priviledge, not an entitlement or a right. And if mom and dad pay their kids’ bills, well, then the kids will stay kids forever.

[anxvariety]

I think we’ll see kids staying in their parents house longer.. maybe converting the garage into a second house?

Has it always been this way for 20 somethings? That isn’t something I would know, I’ve only been 20 now once! 🙂

But as someone said in this thread.. the media is influenceing this generation maybe heavier than any other generation? Us 20 somethings (the MTV generation) are at the plate… with the MySpace generation coming up next!

The difference I think is that 20 somethings these days are taking on debt like never possible before

Think about it real estate gurus.. if banks are letting people borrow 100% against an inflated assett in the hundreds of thousands.. can you imagine what they’re doing us naive young chaps?? Banks are well aware that credit cards are the cream of the crop.. they can charge like 20-30% a year!! Just think how much room they have for error with those sorts of profits…

Even if my frieds were to cut back on what they buy… they are on a ball and chain with the things they already bought… probably 5-10 years of substantial payments whether it be TVs, motorcycles, sound systems, modification for their cars, music equipment.. If they fix their spending now, maybe in 20-30 years they’ll have the 20% down that banks will probably require after this cycle…

That was the whole idea of the thread.. just giving a heads up on at least one sample of 20 somethings.. it does not look good at all.. unless some magic bubble appears and loans them all hundreds of thousands of dollars. I was originally very concenred about this real estate bubble.. now I’m even more concerned about the recovery of this bubbble.. I just can’t figure where the help is going to come from….

When this confetti clears and people ditch the hysteria goggles I think we’ll realize that 2.5 middle class generations have been whiped out.. then hopefully we’ll start seeing an overhaul in banking system with regulations and some sort of checks and balance system/oversight..

[novice1027]

I do agree with Powayseller, in my 20’s I lived in a “petite” studio, where you could open the fridge from the bed, only one sink, etc. Maxed out on credit cards, hoping against hope that my next paycheck would cover all my atm withdrawls.
I think at 28 I woke up and started thinking I better be putting some money away for retirement, and figured it out.
I do think that is part of growing up, but if parents make it too easy for these kids, they will never get the picture.
STruggle is part of it. Boy am I starting to sound old!!

[Beach Rat]

Money has been too cheap to justify saving over the last few years. Why would a 20 something save for 3 plus years (2000K a month and about 70k down payment) to come up with a 20% down payment if they can walk out and get a 103% CLTV that will cover closing costs as well? After all saving takes sacrifice and discipline.

“Don’t panic” life has many cycles. Many problems tend to fix themselves, even without government intervention. 😉 Lenders will get tighter with their loans not because they want to. After all most get paid a percentage of the total loan so it is in their interest to qualify you for as much home as possible. They will tighten their practices because their financial liability is no longer being covered by skyrocketing price increases. I doubt that you will see 103% loans being offered in a declining market. Also as people realize that the SD RE market is no longer increasing and may possibly be decreasing, people are going to be less likely to leverage themselves so far out if they may loose 10% of the purchase price. At 360K on an entry level home that 10% is 36K which is one hell of a Vegas trip in a 20 something world.

As far as myself goes, I am a 20 something and am in the process of straighten out my finances. Now is a great time to start saving up money and if there is a down turn don’t worry about the people that may get trapped in a bad situation (unless the gov. uses your taxes to bail them out) The people whose credit gets flushed in the next few years will just take that much more purchasing power out of the market, especially in the entry level market. Even if there isn’t a crash and prices level you still won’t loose money and may even come out ahead if you invest your saved money into something that is appreciating say shorting bio-techs. Worst case scenario I’m going to rent a place near Swami’s, buy a long board and not have a 2-3k a month house payment to stress over… DAMN!

Patience….

[PD]

I do think twentysomethings are taking on much more debt than previous generations. It is so easy to get credit. I have seen so many who think nothing of buying a 3k plasma TV even though they are deep in debt.
My husband and I were able to pay off all of our college debt (student loans and credit cards) in three years. We worked hard, bought used furniture at consignment stores as well as a second-hand fridge. It seems like twentysomethings are graduating with more debt and then pile it on with expensive TVs, Pottery Barn furniture and new cars. Then you add on the crazy price of housing. How are they going to get ahead?
But then these same things are true for other generations. My parents went bankrupt in their late 40s because they were stupid with money.

[zk]

It must be easier to get credit. I remember when I was 23 (it was 1984). I was making 31k a year and had no debt. I’d never been late on rent, utilities, or anything else. But I also had no credit history. I wanted to buy a stereo, and I wanted to borrow, if I remember correctly, $350. The store (one of the major audio/visual chains) wouldn’t give me the credit because I had no history.

Anyway, to add one more “what today’s middle-aged people did in their 20’s” story:

I’ve had the same job for 23 years. A white-collar salary. I got married at 35, and didn’t have a nickel saved at that time, despite the decade-plus of having a good job. On the other hand, the only debts I’d had were for a VCR (they were expensive in the ’80s – and yes, someone eventually gave me credit), a used car, and a couple houses. The second house I bought was in 1989, which (when I sold it because I was moving) wiped out the profit I’d made on my first house. So the saving was minimal (ok, non-existent), but the borrowing was minimal also (I put down 20% on the first house and 30% on the second house, both fixed-rate 30-year loans), which seems to be a contrast to “kids these days.”

To tie this in further with the RE situation, I’ve got more in the bank now (from selling a house) than I possily could have saved over the past 23 years unless I’d been a complete fanatic about it, sacrificed many things over the years, and made good returns on all investments. And I wonder how many people over the past few years in San Diego have said to themselves, “I can sacrifice and save and hope my investments do well, or I can buy the biggest house I can afford (or can’t afford but can get a loan for) and make even more money and live in a nice house to boot. Prices will keep going up, so there’s no risk. There’s no downside!” How much of the demand and the willingness to pay any price came from that type of attitude? And how much will the reversal of that attitude affect the market? I think there’s a good chance that that attitude change will add up to more price declines than any fundamental economic situation.

[powayseller]

I was at Pottery Barn Kids recently, and was amazed at the number of young families shopping at the UTC store. How can they afford $600 desks for their toddlers? I bought my first child’s crib for $20 at a consignment store, a $25 bunk bed that I painted at a thrift shop when the 2nd one came along. I didn’t have one of those pull-wagons until my 3rd kid. My kids didn’t have their own bedrooms until last year, and until then, had to at least double up. The oldest was 14. How many young families would be able to live like that?

On Bill Handel this morning (640 AM, 6-9 am), he talked about a new study showing middle class parents are reducing retirement savings to buy stuff for their kids. The stuff has gotten more expensive over the years: sports camps, high school trips, sports trips to faraway places, iPods, designer clothes, activities galore, prom, cell phones, …The problem is that parents are scrimping on responsible retirement savings and getting into bankruptcy over these purchases, and that kids have a sense of entitlement.

Delaying gratification and stamping out entitlement are so important to teach our youth.

I think young people had to struggle harder to save for things even 15 years ago. The age of credit has changed the problem of waiting/saving into worrying about how to pay all those debts.

[anxvariety]

It really is amazing to see what parents spend on their kids.. It’s not surprising how effective marketing to children is.. because they’re easier to lure in, and their strength over the parents purchasing decisions is pretty overwhelming, especially if the parents have any guilt about their parenting skills.

My parents really never bought me any toys or fashionable clothes and for the most part I wasn’t interested.. I believe this is because I stayed away from TV..

How did my parents facjilitate this? The way they did it was relatively hands off.. when I was about 2 years old they bought a house on an acre next to a 100 acre park.. They didnt have to worry about their me taking much of an interest in television.. Is it anywonder why kids would take to consumerism and TV brain food if they are tied up in a tiny condo with a 10sq ft patch of grass for them to play in?

I bet most parents here, by virtue of less population, had alot more space to play in when they were kids…

Having that park and land to play on a kid I believe shaped my personality more than anything… I am friendly to animals and nature and am also pretty succcessful at 26.. I attribute it to being outside as a kid, building stuff, catching animals, doing yardwork and exploring. So if parents want to consider their kids in the buying of a house, I give land and parks the highest mark for enriching children…

Hopefully that doesn’t sound like I’m giving parenting advice.. because coming from a 26 year old virgin, you might not want to listen!

Just kidding about the virgin part 😉

[anxvariety]

I double posted please delete. Thanks.

[Author]

Posts