Riding the Trillion-Dollar Real Estate Recovery Roller Coaster

By
Services for Real Estate Pros with RealEstate.com
https://activerain.com/droplet/JKx

Most of the time, on a personal level, the housing market and buying a home exists only peripherally. Since I was asked to approach home buying from not only a personal basis, but as a representative of my generation as well, I’ve been thinking a lot about what it means to own a home.

Up until now, my life plan included graduating from college, getting a good job, living in an apartment for a few years and then buying a modest home.

Now I’m wondering if, perhaps, this is a somewhat juvenile picture. I mean, if Rob Kardashian, with all his oodles of cash, isn’t ready to move out on his own, I’m probably not either.

So I don’t really think about the housing market and I don’t think a lot of my generation really does. Sure, we hear about it all the time. We know that the real estate market has been in turmoil and uncertainty seems to be the watchword. Since buying a home, though, isn’t a priority for most people my age, we tend to hear this stuff, but it doesn’t affect us, so we file it away or use it as cocktail party banter when speaking with older folks.

In my circle of friends, our priorities right now include paying off our student loans, working and saving money. The best way to do that is by staying home with Mom and Dad. I know older generations probably find this idea abhorrent, but it’s a huge trend right now. While “I’m living at home” would’ve been a socially awkward declaration in the past, now it’s becoming an accepted norm.

I don’t want to veer too far off the subject, but I need to clarify that this isn’t just something happening in the United States. There’s even a term for it: “parasite single,” popularized in Japan. It’s quite common for Japanese youth to mooch off of their parents while living carefree lives. Then, when Mom and Dad get old or die, the child takes over the house.

real estate recovery
Riding the Trillion-Dollar Real Estate Recovery Roller Coaster.

As a result, the kids stay single (because let’s face it, dating while living with parents complicates things), don’t move out, don’t get married and don’t have children.

As an aside right here, those of you real estate agents who hope to build a “Millenium Generation” niche? It might not be as lucrative as you’re hoping. From what I’ve heard, Boomers will be buying and selling more real estate than we will.

Anyway, I spoke with my friend, Kat Lai, who is a year younger than I am but is thinking about buying a home of her own. Her parents are originally from Taiwan and are planning on moving back there soon. Kat will be left in the states solo, so she needs to think about what she’s going to do for housing.

I asked her why she was considering purchasing a house instead of just renting and she said that “now is the best time to buy a house.” She says that prices are so incredibly low, interest rates are rock bottom and she “might as well just buy.” 

She isn’t viewing the purchase of a home as an investment, nor does she consider it “settling down.” She simply wants a place to live, far from the maddening apartment scene.

I asked her for her opinions on the real estate recovery infographic by RealEstate.com and she was indifferent. She feels it doesn’t affect her.

While Kat does make quite a bit more money than I do, it struck me as odd that she’s set on putting at least 40 percent down on her home purchase. She’s been saving, and her parents will contribute, to get to the magic 40 percent figure.

Once she explained to me why this was so important I understood and I think I’ll be adopting the same strategy when I decide to purchase a home.

So, overall, I’d say that my generation, as a whole, doesn’t pay a lot of attention to housing market news, and whether the market is “good” or “bad” won’t sway our decision when it comes time to buy. What will matter to a lot of us is that we don’t fall prey to the next crash. To that end, I’ll be saving up until I can put a minimum of 50 percent down on my home. Only if I know that I own at least 50 percent of the house outright will I feel comfortable taking what appears to be a gamble: investing money in the real estate market.

As an older friend explained to me, our feelings make perfect sense. Even though my generation doesn’t pay close attention to the housing market, we’d have to be living under a rock to not know that it’s been devastating, that people’s fortunes have been wiped out and that currently the market is a roller coaster.

She said that this current state of affairs is an example of that old saying  “the iniquity of the father,” although it’s not necessarily being visited upon the sons (and daughters), it is certainly freaking us out and, quite possibly, changing the way younger adults approach buying real estate.  

What I find sad is that to Boomers and other, older generations, real estate was the most secure investment vehicle for their money. For my generation, though, it’s a gamble and we’re leery of it, no matter the condition of the market.

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  1. Bob Crane 10/06/2012 01:33 PM
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Rainmaker
227,627
Debi Braulik
www.roundrealestate.com - Maple Valley, WA
Selling Maple Valley to Fife WA Homes For Sale

Nice graphic. The analytic in me loves it! I have been working with a lot of first time home-buyers. Some with up to $40,000 in student debt. And some had it deferred. They still saw that the alternative (to rent) was not an option. In the south end you can buy a house for less than the same house rents for. Why not own it and build equity (however slow) and get the tax deduction you don't get from renting. I know Kirkland is an entirely different market though. I think geography has a big impact.

Oct 04, 2012 03:42 AM #95
Rainmaker
39,788
Eric Proulx
RealEstate.com - Kirkland, WA

Debi: Interesting! I may have to chat with you further about the Federal Way area. You're right, geography has a big impact so it makes sense you'd be seeing different scenarios in your area. 

Oct 04, 2012 03:46 AM #96
Rainmaker
301,148
Toby Barnett
KW North Sound - Marysville, WA
Toby Barnett

Generationally speaking I can see the appeal to living with the folks. However, and lets be real, that shit just gets old. I find, even though I work with my mother, parents never stop being parents and its always their rules especially when things are going on under their roof. It can be challenging as well as a kid is growing up to feel independent, or is that not the case, when milleniums still live at home? Also, if one wants to bring a date home and show her/him the place it can be ackward to have the parents around.

Another point is, people, whether old or young, have to still live somewhere. Apartment, owning or renting a house, or living with the folks. Unless the parents let their kids live rent free there is a cost with putting a roof over one's head. If rent costs $1,200 per month that is $14,400 big ones a year. Over a five year period that amounts $72,000. That $72,000 can go to a landlord or it can go towards building equity.

Renting doesn't sound to appealing when put that way plus there are someone elses rules to still go by.

Oct 04, 2012 03:55 AM #97
Rainmaker
39,788
Eric Proulx
RealEstate.com - Kirkland, WA

Toby: AMEN, I can see myself having few if any dates while living at home -____-. It is a necessary evil, in my case, but I'm grateful my parents are willing to house me for a few years while I work on tackling my debt. Then I might give you a call =)

Oct 04, 2012 03:57 AM #98
Rainmaker
301,148
Toby Barnett
KW North Sound - Marysville, WA
Toby Barnett

Don't get me wrong I lived with the folks until my last year of college - I was around 26. I didn't fly out of the house because, as you know, Mom and Dad pick up the food bill and didn't charge me rent. But by that time we where at each others throats and it was time to move on.

Oct 04, 2012 04:04 AM #99
Rainmaker
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Interesting that you think of real estate as an investment. For older generations it was a home - a place to put down roots, raise a family, create memories, and stay. The ups and downs of the market didn't matter as much because the home wasn't for sale.

As for living at home with parents, you forget that it used to be the norm for 2, 3, and 4 generations to live together, each contributing to the household and the family. I'm not sure when we got this notion that a young person at age 18 should be kicked out of the nest - or when we decided it was strange and inconvenient for grandma and grandpa to live with the family. Once upon a time, it was how it was.

However - the kids didn't stay on as "guests." They were part of the family and expected to do their share. They definitely didn't "mooch off of their parents while living carefree lives."

Oct 04, 2012 04:06 AM #100
Rainmaker
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Eric Proulx
RealEstate.com - Kirkland, WA

Marte Cliff: An excellent viewpoint, one that I think many have forgotten about in terms of how we view real estate. 

Now that's interesting to me, your comment on the number of generations who lived together. That is something that is not foreign to me, but I'm more familiar with the idea of being on your own after 18. My parents grew up in Oregon, but moved to Seattle to start their own life completely independent of their families. Not that they every pushed their values on me and they're more than welcome to my contribution to the family, but that was the story I grew up with and I guess made into a bit of a fairytale.

Oct 04, 2012 05:12 AM #101
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John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

This is one of the main reasons that the growing trend of Accessory Dwelling Units (ADUs), granny flats, etc are becoming so popular for a lot of folks today. As a RE broker, general & manufactured home contractor, dealer and developer we are seeing more and more of this.

Oct 04, 2012 05:20 AM #102
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Thanks Eric, great info and info-graphic, puts it into perspective, a lot of people made money while things were increasing, agents made commissions, loan officers made commissions, appraisers made a few bucks, and people who were not responsible enough to own a home got to borrow a home, and now We All Get To Pay For This. 

How long before it happens again.

Oct 04, 2012 05:21 AM #103
Rainmaker
39,788
Eric Proulx
RealEstate.com - Kirkland, WA

John Arendsen: Hmm I'm not too familiar with ADUs. Thanks John! I'll look into it.

Bob Crane: I'm glad you liked the infographic. I'm hoping that by living with my folks a few years I can cut back on my student debt significantly so I can be one of those who are responsible enough to borrow for a home =)

Oct 04, 2012 05:25 AM #104
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
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Eric I also enjoyed your perspective on the millennial generation, I have three kids in this group, one lives in my basement and owns a rental, and the other two opt to have their own places but spend a lot of time at home.

Oct 04, 2012 05:30 AM #105
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

That's a great attitude Eric, I am sure that it will work out very well for you!

Oct 04, 2012 05:44 AM #106
Rainmaker
656,917
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

I'm working with a lot of people in their late 20s and early 30s, who are buying a house because the monthly payment is several hundred dollars a month less than renting a comparable property, often with parents' help.  I don't understand how that's a gamble, especially if you put a minimum amount down.  Say you lose the house in another crash 7 years from now, but you saved $300 per month (probably more over time, as rents go up but mortgage payments are fixed), that's $3,600 per year you would have paid more in rent times 7 that means you would have spent over $25,000 more on rent.  

Say you put down $10,000 on the house and you lose it.  You're still better off than if you had rented for those years.

But if you put down more money and lose the house, you lost more money. 

As far as living with the 'rents, i can see it being awkward for singles, but my daughter and her husband and kids live with us and it's working out so well we're thinking of making it permanent.  As others have mentioned, this used to be the norm in America.

Oct 04, 2012 07:26 AM #107
Rainmaker
127,107
Victoria CB Trees
Victoria CB Trees Real Estate Services - Chiloquin, OR
Principal Broker

Excellent post!  If the kids nowadays are indeed looking at purchasing (those that are, that is) to have a place to live, versus as an investment, BRAVO!  I think that's where things got turned upside down... when folks forgot to love their homes and instead looked to turn them over every 2 years for "free" money.  There's nothing wrong with making some money here and there, there's a lot wrong with it being your prime purpose.  Yeah, yeah, my income is based on turn over, but still...

Oct 04, 2012 08:28 AM #108
Rainer
58,098
Cyndi Carver
PRSI Choice Gallery Homes - Bellevue, WA
Newcastle & East Renton Specialist

and the Roller Coaster ride continues. Victoria is so right.

Oct 04, 2012 02:24 PM #109
Rainer
245,400
John Rakoci
Eagle Realty - North Myrtle Beach, SC
North Myrtle Beach Coastal Carolinas

I believe everyone should be fiscally responsible. They should comfortable with their financial decisions too. The funny thing is I know of no one of any age that is happy being a leach on their parents although many have been placed in that position by the 'great obama-recession'. It would be great to have an honest opinion from your parents about raising an adult child through forever childhood and the financial burden it brings. I'd not want to buy a car from a hitch-hiker and a home is a much larger purchase. Somethings popped into my mind as I read all this... responsibility, self respect, respect for others....... and more

Oct 04, 2012 03:03 PM #110
Rainmaker
83,619
Stacey Mayer
Snohomish-Homes.com - Everett, WA
Snohomish-Homes.com

Looking at generations of census records, you'll find most families sharing a house with extended relatives. It was the norm in the recent past. Today, we have a couple of our grown daughters living with us. I'm glad to have a few more years with them while they save to "launch". In the meantime, we make happy memories, and cherish the time we have! I see this as a mostly positive thing.

Debt, on the other hand, is corrosive. Charging $100,000 for an education is outrageoous. That's got to change.

 

Oct 04, 2012 04:08 PM #111
Rainer
293,375
Nan Jester
Exit Real Estate Gallery Jacksonville Beach, FL - Jacksonville Beach, FL
Realtor, Exit Real Estate Gallery

Well, at the end of the day if you buy your home for a reasonably low price and the market goes crazy, may loose some equity but you will still have a tangible place to live after all.  I watched a ton of money disappear in the stock debacle but my homes still stand and have value.

Oct 04, 2012 10:32 PM #112
Rainmaker
544,206
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

Eric, I really respect the "idea" of the Millenial generation, but what's up with all the "entitlement?" I won't go into personal issues but it seems that the kids of your generation are taking advantage of their parents. Hope you can explain that one to me.

Oct 05, 2012 10:02 AM #113
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Michelle Carr Crowe,Altas Just Call...408-252-8900!
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

You can always live in a home. Bad stocks only serve as toilet paper.

Oct 06, 2012 02:24 PM #114
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