Retirement wealth hurt by housing market
What happens when your home is your biggest investment: Homeowners near retirement age are suffering markedly from dropping prices, says the Center for Economic and Policy Research.
In a new study, the Washington think tank projected wealth -- or, rather, lack of wealth -- among people who will be ages 45 to 54 next year:
The first scenario assumes that real house prices fall no further than their level as of March 2008. The second scenario assumes that real house prices fall an additional 10 percent as a 2009 average. The third scenario assumes that real house prices fall an additional 20 percent for a 2009 average. The projections show that the vast majority of families in these age cohorts will have little or no wealth by 2009 in any of these scenarios and that the cohorts just approaching retirement will have very little to support themselves in retirement other than their Social Security. The projections also show that a large number of families in these age cohorts will have little or no equity in their homes in 2009.The picture is brighter for renters, as the press release notes:
In fact, the renters within each wealth quintile in 2004 will have more wealth in 2009 under all three scenarios, than will the homeowners from the same quintile. These projections underscore the dramatic impact of policies that promoted homeownership during the housing bubble.
Well -- you know what comes next. Poll time:
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It seems to me that far too many people are trying to say that falling housing prices hurt innocent bystanders.
First of all, anyone considering retirement (being 65 years of age or so) would probably have been in their house for 30 years or so. Clearly, then, they have equity; it seems unlikely that a person about to retire would have purchased thier house during this bubble period which just began a few years ago. While they may not have the astronomical amount created by the bubble, they still have equity.
Second, when they purchased their house, they could not have forseen this bubble and so the huge increases could not have been a part of their retirement equation.
Forgive me for sounding cynical, but I am sick and tired of hearing people bemoan the "poor" folks who will only make $400K on their house, as opposed to $500K. Everyone has been saying this, but retirement wealth comes from many sources, pensions, stocks, etc. All of those are coming down too, and I don't see Congress lamenting that fact and propping up those markets.
This housing bubble created false expectations and it's time everyone came back to earth. That's when people like myself can also purchase a house and begin to save for retirement.
Posted by: Anon | June 29, 2008 10:16 AM