Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

43 responses to “Affordable Home Price on Par with Median Price”

  1. softwarengineer

    SWE Can’t Prove It [the data suspiciously isn't tracked] But He’s Still 99.99% Sure

    This bogus $60K+ household income in the Seattle area is a complete joke. It doesn’t take in to account a new Seattle area Norm…..we’ve packed our local homes with mote than 3 incomes each to survive…..its either through Millenials subletting apartments/houses together or still living with mom and dad.

    No one wants to admit the truth.

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  2. Kary L. Krismer

    RE: softwarengineer @ 1 – Maybe it does take that into account (I don’t know). But three guys each earning $20k might be $60k of household income.

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  3. softwarengineer

    RE: Kary L. Krismer @ 2

    Yes Kary

    But the number of incomes per Seattle area household data is non-existant….try googling for it.

    We all assume the $60K+ per household income is like 1-2 income reality [avg 1.2 incomes per married couple, the last I read]….3 incomes at $20K/person are not qualified to buy a house…..they can share a rental though.

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  4. Erik

    This is good data. Now that the smart people bought low, it is time for a sell off and market correction. It has to come at some point in the next year or so. No way we will keep going up without one more down.

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  5. ARDELL

    RE: Erik @ 4

    2016. Think about it 2008 was a huge down year. 2012 is the new bottom. Think Presidential Election years, as the rhetoric of a Presidential Election erodes consumer confidence for months on end.

    Not a surefire method…but has some basis I think.

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  6. Shoeguy

    I question any household’s ability to make a $330,000 mortgage payment ($410,000-20%) grossing only $68,000 a year.

    Even at today’s interest rates, those numbers just don’t add up.

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  7. Erik

    RE: ARDELL @ 5
    I have always thought that would be the case too since Ray Pepper posted that link to a guy that made that same claim and gave some good reasoning. Thank you for affirming that for me. It is nice to hear from someone that really understands the market. If you and ray both think that, it will most likely happen.

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  8. mike

    RE: softwarengineer @ 1 – The average household size is 2.0 people. 3 person let alone 3 income households are outliers.

    Looking at my own neighborhood, it’s a mix of 1 and 2 income households, yet somehow the median price is over 50% greater than the KC median. A single guy in his early 30’s just dropped $800K on a house down the block.

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  9. boater

    Well keep in mind starting software engineering salaries at AMZN GOOG and MSFT are just about 100k. Add to that most tipped service employees are making 10-15% more than their reported wages. Now that doesn’t help getting a loan but it does help explain how they can pay rents that justify the home prices. I think the San Francisco chronicle recently reported the tech jobs produce more service workers than the blue collar workers they often displace.

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  10. Kary L. Krismer

    By mike @ 8:

    RE: softwarengineer @ 1 – The average household size is 2.0 people. 3 person let alone 3 income households are outliers.

    Looking at my own neighborhood, it’s a mix of 1 and 2 income households, yet somehow the median price is over 50% greater than the KC median. A single guy in his early 30’s just dropped $800K on a house down the block.

    People with greater wealth and income will tend to congregate in certain areas. That single sentence points out two problems with looking at median income (using wealth rather than income to buy and uneven distribution of people).

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  11. softwarengineer

    RE: Shoeguy @ 6

    Yes Shoeguy

    Even King News is fessing up to the “destroyed Seattle” near Amazon horrifying expansion: due to single bedroom $2200/mo rents. No one can afford it essentially….unless we go to 4 to a bedroom like San Francisco…its ruining our city.

    http://www.king5.com/news/cities/seattle/Priced-out-in-Seattle–246084501.html

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  12. softwarengineer

    RE: Kary L. Krismer @ 10

    Yes Kary

    But again I’m almost 99.99% sure but can’t prove it [again googling is useless]…..those incomes aren’t in the real estate market….its 2014 and the Millenials are the 1st time home buyers….whether the X Gens like it or not….without Millenials in the housing market [even 4 to a bedroom], the buyer supply is dead along with inventory.

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  13. mike

    RE: softwarengineer @ 12 – You can’t really be this dense. Who do you think is buying up all of these median+ priced homes, if not the people with the income to afford them? Millennials packing in 6-deep? The Chinese?

    Again, looking at my own neighborhood there aren’t many millenials around unless they’re still living with their parents. The people buying the homes now tend to be in their 30’s and 40’s if not older. Many of them are move up buyers that managed not to lose their shirt buying in the wrong area during the crash. You seem to be stuck thinking that all home buyers are 23 years old and working retail jobs. No wonder you can’t google to find any evidence of this, it’s not happening.

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  14. softwarengineer

    RE: mike @ 8

    Statistics in Writing Please

    Your allegations hold no water.

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  15. wreckingbull

    RE: mike @ 13 – This is true, but the day is not far off when boomers are going to try to unload their overpriced homes on millennials, who have little savings, much debt, and even an aversion to the idea of home ownership. This is going to be a rude awakening for said boomers (and gen X), especially those who saved little for retirement and viewed their home as a nest egg. I don’t think the longer term outlook is a bright one.

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  16. Erik

    RE: wreckingbull @ 15
    I don’t think home ownership is the American dream anymore either and therefore it will boom and bust like the stock market moving forward. I will continue buying low and selling high to baby boomers, gen x, and millineals. I don’t discriminate on age.

    The attitude of programmers and like minded people on this site is that the future will follow the previous rules. That is low level thinking. It is more complex than that. Times have changed and we need to change with the times. People that buy and wait for the house to appreciate will lose out. Cash flow counts, but waiting for appreciation is foolish.

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  17. ARDELL

    RE: wreckingbull @ 15

    For the purpose of this discussion, can we agree to a definition of “millennials”?

    I like this one:

    http://www.slideshare.net/thesound/millennials-vs-genx

    …which puts the emphasis on the year the person “came of age” vs the year they were born.

    I have two Gen X children and one Gen Y-Millennial child. Yes the latter is the youngest, but year born is not necessarily the primary determining factor. It is possible they are all Gen Ys but only the youngest falls into the subset of Millennial.

    Hard to discuss the impact of “millennials” on a market, without first determining that we are using the same definition for that term. There is a vast difference among the available definitions and my perception is that the true millennials as a subset of Gen Y are still too young to be part of the “housing” discussion, but not with regard to other products.

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  18. mike

    RE: wreckingbull @ 15 – Right, but this isn’t going to affect all markets evenly. Boomers for the most part tend to be concentrated in the suburbs more than the cities because that was what was popular at the time they bought. The largest impact will probably be inner ring suburbs built from the late 60’s through 1990. The millennials on the other hand aren’t exactly flocking to these locations, and prefer something a little more urban if not directly in the downtown core. The folks who have been living without cars until age 30 aren’t as likely to want a 25 mile commute all of a sudden even if that’s what their parents did as soon as a baby came along. The savings and debt problems among the millenials I think will mainly manifest in buying later in life, not renting forever.

    Also, the boomer ‘unloading’ isn’t just a future event. Most of the older boomers I know have already sold off their ‘working and child raising homes’ and moved into their final, or close to final retirement homes. A bunch of ‘em were forced out by foreclosure as well. More are yet to sell, but a lot of them prefer to age in place so their homes may not hit the market for another 20-30 years.

    I agree both are strong headwinds against the kind of appreciation seen in the 25 years before the bubble, but I also don’t see any reason to believe they will lead to across the board price declines.

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  19. Erik

    RE: mike @ 18
    Wrong. Read Ardell comment number 5. 2016 will be a down year. That is not the first time I have heard that. Looks to me that things are adding up to make 2016 a down year.

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  20. Shoeguy

    RE: Erik @ 19

    I think that interest rates will return to historic norms before 2016. Rates at historic norms with the Fed out of the MBS buying business will dictate when a true bottom occurs.

    Ardell claiming that 2012 was a “bottom” (that lasted less than two years before bouncing right back into bubble territory) is a bit short sighted. The Fed has completely manipulated and gamed today’s housing market. It’s a complete joke, which is why mortgage applications are back down to 1997 levels. Artificially suppressed interest rates, record low supply, and carte blanche given to investors to rip affordable houses out of the hands of first time buyers by using all cash has completely turned the housing market upside down.

    What would today’s median Seattle house price look like at a 7% interest rate with no Fed manipulation or MBS purchases, investor activity back down to single digit percentage interference, supply back up to 6-8 months, foreclosures back to normal levels?

    It wouldn’t be anywhere close to what it is now. No one is allowed to call a bottom until no more games are being played.

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  21. mike

    RE: Erik @ 19 – For someone that wasn’t even aware there was a bubble 4 years ago you’ve certainly become quite the expert. We’ll see how this plays out but so far my track record is a bit better. No sleight on Ardell, but she wasn’t able to time the market last time around either, so that you’re in agreement with her on this doesn’t convince me you’re looking at the situation objectively.

    You should look at the housing starts data locally and nationally. Unless building magically jumps up by around 500% between now and 2016 (less than 2 years), the inventory situation is not going to come close to resembling what it was in 2006-08. I’m not saying things won’t soften by then, but there will not be another inventory glut the way there was 7 years ago without some major changes in the housing supply.

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  22. Erik

    RE: mike @ 21
    I predicted a long time ago that this thing would oscillate in smaller and smaller waves until it flat lines. We are due up for a low since this is the high. I was a foolish boy 4 years ago that was not aware of market trends. I was merely trying to survive. I have learned quickly.

    I don’t believe that median housing prices directly correlate to supply and demand, so looking at housing starts won’t really help me predict a bottom. Factors such as affordability and how much people make in the area also drive housing prices. Ray Pepper also thinks there may be a downturn coming up around 2016. Matthew also thinks that Summer 2013 was the high point in the housing price market in KC.

    Shoe Salesman- Per the case shiller housing index, the bottom of the market was February 2012 in KC. There is no disputing that, so it isn’t how she feels, it is a fact. You act as if you have an inside tract since you decoded that the fed is manipulating the market. I think we are all fully aware of that and the prediction of the bottom incorporates that manipulation. If you wait until “no more games are being played” to call a bottom, you will never call a bottom. Things are always being manipulated. Tim use to assume 6% interest rates to see what things will be like when fed support is no longer propping up housing prices. Not sure where the 7% comes from… You have a weak argument. You seem new.

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  23. whatsmyname

    RE: wreckingbull @ 15
    The real mystery is how did the boomers wind up with all the overpriced houses? This was the generation that wasn’t going to cut its hair, sell out to the man, or settle for monogamous baby raising prison in ticky tacky suburbia.

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  24. whatsmyname

    RE: Shoeguy @ 6 – I agree with you that matching up a $330M mortgage with a $68M income strains good sense at least. However, given that a third of housing is rentals and that there are additional significant populations of condo owners and people with accumulated capital (even equity) that can subsidize a purchase; there is absolutely no reason to draw equivalence between median income and median SFR prices in terms of actual purchase.

    Also, I do not think that, “carte blanche given to investors to rip affordable houses out of the hands of first time buyers by using all cash” will ever be against the rules of un-manipulated capitalism.

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  25. Shoeguy

    RE: Erik @ 22

    The 7% comes from the fact that historically interest rates averaged between 6-8% minus spikes in the 1980’s and lows of the 2010’s. In fact, rates were OVER 7% all through the 1990’s. Are you old enough to remember the 1990’s? Doesn’t sound like it.

    There was no disputing in 2006 that prices would permanently plateau and would never drop. Until they did. There is no disputing that 2012 was the bottom…until interest rates climb, and it is universally agreed upon by every single economist out there that they HAVE to rise, and with wages continuing to stagnate prices drop below 2012 levels.

    I’ve been lurking on this board since 2006, and back then there were a lot of Bulls much more intelligent and articulate than you, Erik. They argued every reason under the sun as to why housing was just fine, that we’d have no drop, that it would be a soft landing, etc. They were mysteriously absent from this board in 2011.

    Now I have noticed in the last six months that the Bulls are back with a vengeance. Unfortunately there was no “I told you so’s” back in the 2010’s to the vanished Bull masses (unless you were lurking), and I suspect that this will be the case again in the near future when history repeats itself.

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  26. Carol

    RE: Shoeguy @ 25 – What happened to Corndog? He was a big Bull. I haven’t seen him for a while!

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  27. redmondjp

    By Shoeguy @ 25:

    RE: Erik @ 22 – Now I have noticed in the last six months that the Bulls are back with a vengeance. Unfortunately there was no “I told you so’s” back in the 2010’s to the vanished Bull masses (unless you were lurking), and I suspect that this will be the case again in the near future when history repeats itself.

    Maybe ‘Erik’ is Meshugy’s new handle, now that he’s out of his Ballard matchbox . . .

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  28. Azucar

    By Erik @ 16:

    RE: wreckingbull @ 15
    I will continue buying low and selling high to baby boomers, gen x, and millineals. I don’t discriminate on age.

    Haven’t you only done that once (bought low, sold less low), and the other time you bought less low and then walked away from the mortgage?

    They way you’re telling the story now, it sounds as if you’ve had dozens of successful real estate transactions.

    A .500 record is ok, I guess, but it seems you are a bit cocky for a “real estate mogul” who is living with his parents.

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  29. Blurtman

    RE: whatsmyname @ 23 – It was merely a marketing campaign to sucker in the unsuspecting. Coming next – the record youth joblessness engineered to ensure a ready supply of bedpan emptiers and attendants for the elderly wealthy, hanging on to bankrupt Medicaid. Oh yeah, they’ll be buying the ridiculously expensive sports cars that they cannot drive.

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  30. Kary L. Krismer

    By Erik @ 19:

    RE: mike @ 18
    Wrong. Read Ardell comment number 5. 2016 will be a down year. That is not the first time I have heard that. Looks to me that things are adding up to make 2016 a down year.

    No one can predict the future. Personally I think Obamacare will destroy the entire economy eventually if they don’t change it, so I think the economy will go down too. Does that mean it will happen? No. There is no certainty of even six months from now and anyone who tries to tell you otherwise or tries to predict the future is fooling you and/or themselves or worse.

    You seem to be impressed by Ardell’s ability to predict the future. This should open your eyes.

    http://seattlebubble.com/blog/2010/10/26/case-shiller-seattles-home-price-double-dip-begins/comment-page-1/#comment-113959

    As to Ray Pepper’s predictions, he was the one who repeatedly predicted more and more foreclosures. “They’re all coming back.” That too has not happened (yet).

    As to your own prediction, the local market of non-distressed properties has been flat for quite some time and started heading up last year. So your own prediction was wrong. The oscillation you’re saw was just market fluctuation with distressed properties making up more of the market in the winter months.

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  31. Kary L. Krismer

    By whatsmyname @ 23:

    RE: wreckingbull @ 15
    The real mystery is how did the boomers wind up with all the overpriced houses? This was the generation that wasn’t going to cut its hair, sell out to the man, or settle for monogamous baby raising prison in ticky tacky suburbia.

    Ignoring the claim that they are “overpriced” they would be more likely to own higher priced houses because they bought earlier in places that are closer in. Not so long ago Kent was be Maple Valley. There are places in Covington and some place on the east side I cannot place right now that were originally designed to be vacation/recreation areas.

    That’s another thing that doesn’t show up when you look at the median over the long term. Constantly building houses further and further out pushes the median down, and that’s how you end up with tiny houses in Ballard being so expensive.

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  32. Ira Sacharoff

    By Kary L. Krismer @ 29:

    By Erik @ 19:
    RE: mike @ 18
    Wrong. Read Ardell comment number 5. 2016 will be a down year. That is not the first time I have heard that. Looks to me that things are adding up to make 2016 a down year.

    No one can predict the future. Personally I think Obamacare will destroy the entire economy eventually if they don’t change it, so I think the economy will go down too. Does that mean it will happen? No. There is no certainty of even six months from now and anyone who tries to tell you otherwise or tries to predict the future is fooling you and/or themselves or worse.

    You seem to be impressed by Ardell’s ability to predict the future. This should open your eyes.

    http://seattlebubble.com/blog/2010/10/26/case-shiller-seattles-home-price-double-dip-begins/comment-page-1/#comment-113959

    As to Ray Pepper’s predictions, he was the one who repeatedly predicted more and more foreclosures. “They’re all coming back.” That too has not happened (yet).

    As to your own prediction, the local market of non-distressed properties has been flat for quite some time and started heading up last year. So your own prediction was wrong. The oscillation you’re saw was just market fluctuation with distressed properties making up more of the market in the winter months.

    I like Ray Pepper. I like Ardell. I think they’re both nice, smart, and funny people. But the way Erik throws around their names and predictions, you’d think they’d never made any mistakes, and were praised across the nation for their uncannily accurate predictions.
    Smart real estate investors have success after success to show. These people usually don’t boast about their success, they just keep making good investments. Erik had a recent success, a real accomplishment, something to be proud of. Maybe he’d be in the “Top Prospects” category, but it also might be a ” even blind squirrels find acorns once in a while” case. If Erik can go ahead and do this again three or four times, I’ll be convinced.
    As far as predictions go, I’ll continue to make them, and I’ll continue to be wrong a certain percentage of the time. I’m not like Kary, who won’t make predictions because ” you can’t.”
    If you don’t make predictions, you can’t be wrong. Me? I’ve looked like a fool before, and it’ll happen again. I’ve made accurate calls as well. But I don’t think I’d want someone on Seattle Bubble to hold me up as a paragon of predictive accuracy, because then, after I’ve predicted something happening that doesn’t happen, I look like a real idiot. And I can do that by myself, without someone praising and highlighting my predictions.

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  33. Kyle

    I wish everyone was forced to put dates and durations with their predictions. As it stands everyone will be right eventually. At some point prices will be higher, at some point lower. More affordable, less affordable. Up and down, up and down, up and down.

    The only people who are wrong are the ones that think we’re living in some special time, that “this time is different”. Its not. Market will never be free from “manipulation”. Generations come and go. No such thing as a “correct” interest rate. On and on and on

    Until I see the “next generation ” opting to live outside I think its safe to say demand for property and shelter isn’t disappearing anytime soon

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  34. Shoeguy

    By Carol @ 26:

    RE: Shoeguy @ 25 – What happened to Corndog? He was a big Bull. I haven’t seen him for a while!

    SHHHH! If you say his name two more times he will appear. Do not tempt the fates!

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  35. whatsmyname

    RE: Kary L. Krismer @ 31RE: Blurtman @ 29 – I was trying to draw an ironic parallel with wb’s contention that boomer’s wouldn’t be able to sell their “overpriced” houses due to generational stereotypes. Am I getting too subtle?

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  36. Ray Pepper

    RE: Kary L. Krismer @ 30

    Oh I disagree Kary. I’m spot on! ..Remember they are ALL COMING BACK…Via Foreclosure, Short sale, Deed in Lieu, Principle Reduction, and DEALS OF A LIFETIME from banks given to home owners to stay in their homes. Home prices all had to be reset to current values in a variety of ways as I discussed incessantly. So many friends and investors got 100-400k lopped off their principle balances that they got their GIFT from the housing crash. The only ones who lost were the ignorant, the complainers, the ones who walked away, the ones who short saled and took a pittance as a departing gift, and those who “were scared.”

    And guess what Kary…The gifts today are BETTER then they ever were for the astute homeowner who seeks State mediation, rides the “hamster wheel”, and understands that the bank has a better chance at picking up tooth piks with their ass cheeks then taking their home in the coming years.

    All the current SLS customers, formally Countrywide, via B of A, are sitting on a TREASURE because those notes are LONG GONE! Will you end up with the home? Who cares!! You have been living for FREE with thousands of others!! The Attorney General has your back and pleads for you! Taxes and insurance will continue to be picked up, and there is no end in sight other then the homeowner VOLUNTARILY signing the home away…and the only way this will happen is with one HUGE paycheck to the homeowner. You see homeowners, if your Astute, you realize your EQUAL partners with the Bank in 2014 but you hold the deck! Never forget that!

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  37. wreckingbull

    RE: whatsmyname @ 35 – Not too subtle, just a rather flaccid response. Nowhere did I reference a stereotype.

    We have a looming crisis in the form of a generation that is not even remotely prepared for retirement. The median net worth of those heading into ‘retirement’ now is less than 150K. There is going to be a set of effects from this. One of these effects is going to be downward price pressure on real estate as this generation cashes out. Is that enough to cause nominal price declines? Maybe not, given our corrupt central banking infrastructure, but it certainly does not portend a rosy future.

    I don’t know about you, but this does not look like a “Centrum Silver” advertisement to me:

    http://www.businessweek.com/articles/2014-01-02/baby-boomers-poorer-in-old-age-than-their-parents

    And yes Kary, this is a prediction.

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  38. Kary L. Krismer

    By wreckingbull @ 37:

    And yes Kary, this is a prediction.

    That’s not really a prediction, particularly when you say: “Maybe not, given our corrupt central banking infrastructure . . ..” ;-)

    There are always a lot of reasons to be pessimistic about the future, because human beings always face a lot of problems. That’s the nature of life. I don’t have a problem at all with pointing those things out as being negatives. I did so myself mentioning Obamacare above and I’ve even mentioned the preparation for retirement issue you just mentioned, although in a different context.

    In contrast, there’s probably fewer specific reasons to be optimistic, but there is the fact that things usually work themselves out somehow. But after learning in 2008-2009 how poorly corporations do risk analysis, there’s probably less reason to be generally optimistic.

    But my problem with predictions of real estate is that there are just far too many variables and many of those variables (e.g. future interest rates, unemployment, etc. ) in turn have too many variables to predict.

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  39. masaba

    RE: wreckingbull @ 37

    What Kary said. Also, it’s not really a prediction if you don’t put a date on it. If the date is more than say, 5 or so years out, you are probably just pissing into the wind as well.

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  40. masaba

    RE: masaba @ 39

    Let me add to my last post. If you don’t have a specific date, you at least have to have a strong ‘trigger event’ for your prediction. For example, if this happens, then this will happen.

    The problem with your prediction, Wreckingball, is that Boomers are already cashing out, and they will be doing so for the next 30-40 years. So I read your prediction as, sometime during the next 30-40 years, there will be downward pressure on real estate, and that downward pressure will have something do with boomers selling. Okay, I can’t argue with that bold statement.

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  41. boater

    My parents are on the upper end of the boomers or in the previous generation. They don’t have what I would call enough for retirement. Their solution is keep working and stay in their existing paid off home.
    I suspect that’s going to happen more and more. If they need more income I think they will rent rooms in the house. When they die my sister and brothers will get the house. If they are smart they’ll keep it and rent it out.

    That’s inventory that never goes out on the market. If my older brother still doesn’t own a home I suspect my siblings will give him the home. Another way inventory will pass that I think will become more common.

    Tim do you have a way to track quit claim deeds to see if intra family transfers are increasing?

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  42. whatsmyname

    RE: wreckingbull @ 37
    Poor, debt ridden, and no longer interested in homeownership is not a millennial stereotype?
    C’mon; all that’s missing is “tats and tech savvy”.

    I do respect the comparison of the BW article with a Centrum commercial. Realistic content is about the same. Lifestyle and working choices between this father and daughter could not have been more different. I will spare you the republishing of my article, “Bill Gates Proves Boomers Better Off than Parents”.

    Let’s get to business week’s supposed statistical meat: The author actually states that 55-64 year olds were more strongly centered in stocks and real estate, and consequently were worth 8% less than their parents……. IN 2011. Never mind that these asset classes are up about 30% since that time. Never mind that most of these people (not to mention the boomers younger than 55) have years to work and save. But best of all, never mind that we are talking about median net worths for both generations that would put these working boomers at a massive $14,000 total net worth disadvantage – and just at the low-point of their worth approximately 3 years ago. I admit – this is the kind of generational tipping point that leaves me flaccid.

    You must be smarter than this. After all, you bought a house in 2011.

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  43. Jonness

    By Kary L. Krismer @ 30:

    No one can predict the future.

    “There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.”
    – Hamlet (1.5.167-8), Hamlet to Horatio

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