
Baby boomers are making it harder for millennials to buy homes - MilnerRoute
http://www.sfgate.com/technology/businessinsider/article/Baby-boomers-are-making-it-harder-for-millennials-11162394.php
======
kevinburke
I'm going to sound like a broken record here but there are policy and other
decisions being made in the Bay Area that are restricting the housing supply
and driving up the price of existing housing. You don't have to be a bystander
in this process, you can help lobby for more supply.

A list of propositions and legislation to support (SF, Brisbane, Mountain
View, the CA state legislature) can be found here:
[https://news.ycombinator.com/item?id=14195301](https://news.ycombinator.com/item?id=14195301)

~~~
jrapdx3
The question I have has several parts, but fundamentally I wonder if the
housing supply could even be increased enough to materially affect housing
prices.

Not saying that the housing supply isn't excessively restricted, but how much
can restrictions be decreased and how much difference would it make?

An analogy is building freeways to relieve traffic congestion. What regularly
happens is that additional roads or adding lanes to existing roads provides
temporary respite from traffic jams. But before too long the roads are jam-
packed again, the problem isn't solved, just have more cars clogging traffic.

I suspect adding more housing won't lower housing prices, just bring some more
people into the area. BTW this is what's happening here in Portland OR, where
a building boom has been going on for years. The area population has
increased, housing prices are still out of range for many people.

~~~
kevinburke
> fundamentally I wonder if the housing supply could even be increased enough
> to materially affect housing prices.

Yes, it can; SF built 5,000 units last year, a record, and rents and owner
move-in evictions finally declined. At the very least, building more housing
can prevent further large price rises.

> BTW this is what's happening here in Portland OR, where a building boom has
> been going on for years. The area population has increased, housing prices
> are still out of range for many people.

The question is what would happen if you didn't build the housing. I contend
that the people moving in would outbid everyone for the existing housing
stock, which would drive rent increases even more than rents are currently
going up. It may be that the new housing is just keeping things at a base
level.

Flipped on its head the logic here doesn't really make sense; destroying
existing housing stock would be disastrous for rents and prices, it makes
sense that building more would help prevent increases.

~~~
timthelion
In eastern europe, we have Paneláky
<[https://www.google.cz/search?q=sidli%C5%A1t%C4%9B&source=lnm...](https://www.google.cz/search?q=sidli%C5%A1t%C4%9B&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjf0YbVhYPUAhVLiCwKHQXjBzAQ_AUICigB&biw=1709&bih=980#tbm=isch&q=panel%C3%A1ky>)
and the housing prices are low in the panel houses and much higher everywhere
else (though no-where nere US levels). You can even buy an apartment in a
panel house an hour and a halfs drive outside of prague for $5000USD
[https://www.sreality.cz/hledani/prodej/byty/ustecky-
kraj,lib...](https://www.sreality.cz/hledani/prodej/byty/ustecky-
kraj,liberecky-kraj,kralovehradecky-kraj,karlovarsky-kraj,plzensky-
kraj,jihocesky-kraj,vysocina-kraj,pardubicky-kraj?cena-od=0&cena-do=120000)

~~~
mattmanser
In Europe and the US a lot of these were built too.

A lot of them are now being torn down.

I'm not an authority on why, but I believe they tended to be crime and drug
hot spots. I have also read of various health problems being associated with
them (both physical + mental).

~~~
zaccus
Buildings like that in the US tend to be housing projects, where people are
less likely to have a sense of ownership. Not exactly apples to apples.

~~~
timthelion
There was also a technical issue, caused by the fact that in the US, many of
the buildings had windows which could not be opened. People didn't like that.

------
BrentOzar
The flip side of this is that as the baby boomers pass, there's going to be a
glut of retirement home communities available - and with my generation
probably never being able to retire, that's going to be an interesting market.

~~~
flashman
Retirement home corporations are going to end up holding huge real estate
portfolios because they'll take boomer houses in exchange for aged and end-of-
life care.

Wealth concentrates, virtually without exception.

~~~
expertentipp
> Retirement home corporations are going to end up holding huge real estate
> portfolios

...then there is reverse mortgage - pay off the mortgage for decades, and then
return the property to another financial institution in exchange for better
pension.

------
jmclnx
Not really the Baby Boomers fault, but bad decisions made over the past 30/40
years are coming to fruit. Right now only a hand full of cities have 'real'
jobs and those cities have strict zoning laws (and NIMBY). So young people in
the US, if they want to make any real $ need to move to those cities,
otherwise all they will have are 'mcjobs'. I would not be surprised to see
slums like the type seen in many poor countries start to occur near these
cities in 20 or so years.

~~~
randomdata
_> if they want to make any real $ need to move to those cities_

This is the crux of the matter. The market always seeks equilibrium. If there
is an income advantage in one location, people will move there, driving up
costs in the process, until the point that there is no longer an advantage.
Certain cities have held an advantage in earning ability for quite some time
and the market is attempting to correct that disparity by increasing costs.

People complain about how expensive these homes are, but in reality they are
the _cheap_ ones! The low dollar value homes out in the middle of nowhere are
truly the expensive ones. Like you mention, the profitability in a high cost
city outpaces the profitability elsewhere, even after you consider that your
costs are lower. If the lower paying job, but also the lower expenditures,
provided a higher income there would be absolutely no hesitation to take a
'mcjob'.

The question is: At what point does the 'mcjob', where housing is low cost,
actually provide – after accounting for costs – a higher income and become the
more desirable type of work? That is when housing in the high-priced cities
will stabilize, as there is no longer the financial advantage to live there.
Until then, expect price to continue upward.

~~~
Gibbon1
The income advantage is due to concentrated wealth and income inequality. What
you see is a few industries and the people that run them receive the bulk of
the excess capital. That results in a firehose of money pointed at a couple of
cities where the golden industries leaders all live.

~~~
randomdata
But the fact remains that the income advantage only remains an advantage so
long as the costs remain low. The expense side of the equation can only rise
so high before income becomes zero, or even a negative value. NYC and SV are
able to thrive because housing is still cheap, but the market is quickly
correcting that fact. At some point, if the trend continues indefinitely,
one's income in these cities will leave them with a _lower_ income than
someone working at a minimum wage job in a low-cost area. If the income
advantage shifts to these other locations, people will follow.

~~~
Gibbon1
Trouble is you need a critical mass of social, technical, and cultural
infrastructure. It's not like it doesn't happen. But unless a company with
deep pockets is behind it, whatever one tries to plant there will die. Point
is there are a lot of frictions. And big inequality is a big one.

~~~
randomdata
That is really a non-issue. We don't have to invent new places. Low-cost
communities already exist and are abundantly found. Incomes just tend to be
lower, thus they are less appealing. But that can quickly change. Imagine,

1\. Community A provides revenues of $30,000 per year, and expenses of $20,000
per year, with an income of $10,000 per year.

2\. Community B provides revenues of $100,000 per year, and expenses of
$50,000 per year, with an income of $50,000 per year.

Naturally Community B is going to be the more appealing option. But if housing
costs (among others, but housing is the topic at hand) keep increasing in
Community B, at some point you might find your expenses at $90,000 per year,
leaving an income of $10,000 per year. Exactly the same as in Community A. At
this point there is no income advantage in either location.

Assuming you live in Community B, until your income is reduced to that of
Community A it is worthwhile for you to spend more and more of your revenues
on housing to keep a good thing going. Even if your expenses rise to
$80,000/year in order to stay in Community B, it is still a good deal. Your
income is still double that of Community A.

But the market always seeks equilibrium. While corrections take time,
eventually your Community B income will have to fall to the same level as
Community A to eliminate the income advantage. As we discussed earlier, as
long as one place has an advantage, people will move there and compete for
resources (i.e. drive up costs) in the process until the advantage no longer
exists.

And this is why certain markets are seeing incredible housing price growth.
The market is correcting such that your your six figure developer salary in
San Francisco provides the same income as working at McDonalds in Detroit.

------
mnm1
"Many homeowners are holding off on listing their homes for sale because they
want to avoid entering a competitive buyer's market, further tightening
inventory."

I don't understand this. What's the advantage of holding off when you have
multiple people willing to bid on your house, including above asking?

~~~
qzervaas
Because you're subsequently buying into the same inflated market.

~~~
ianai
It's also much easier to stay where you are than to move. Real estate is a
very illiquid asset and it is supposed to be. If you perceive your house being
worth more 12 months down the road it makes sense to stay until that point.

This is where you get people taking out second mortgages. It be a great idea
today but horrible 5-10 years out. Once valuations correct many people will be
under water and looking at defaults.

Real estate is not where you want overvaluations and (huge) inefficiencies.

------
mythrwy
Speculation and free markets are great and all and there is a time and a place
for those and it allocates capital more efficiently than central planning
(from what we have seen so far) and freedom to attain wealth is a beautiful
thing.

That being said, there are basic human needs that should be met by any
civilization of note. And if a civilization doesn't then it is failing. These
needs include the the opportunity to obtain food and water (or food and water
itself), basic physical security (for the most part), and in respect to the
topic, a place to lay ones head.

Home speculation never should have been allowed to grow to the monster it has
become. Ever. Not just because it's morally wrong, but because it is
destabilizing. As we found out before and will again.

When you have people sitting on three vacant homes in hopes they will
appreciate while others are shitting in the streets and sleeping on sidewalks
it's absolute lunacy. We all are entitled by birthright to a little piece of
earth. It's our heritage. The current situation is just objectively nuts and
will be corrected. Sure as gravity or the sun rising in the morning.

Now, I'm not suggesting to take everything from the rich and give to the poor.
I know that doesn't really work sustainability. I also know everyone in the
world can't live in the most desirable places. So I'm not making any concrete
suggestions at all because I don't have the answers. But what we have going on
now is both horrible and crazy.

~~~
manyxcxi
I wholeheartedly disagree that land in the US is anyone's birthright, with the
exception of people of native descent, and they (painting with a VERY wide
brush stroke, I know) generally didn't believe in land ownership to begin
with.

I do agree that speculation has driven to some crazy things in the US housing
market. Though I'm not against speculation in any market per se, when we see
what banks, businesses, and otherwise shady actors were/are doing to
manipulate things in their favor when we're talking about something as
important as housing, it gets quite frustrating.

I say this as a guy who had absolutely no issues with purchasing my own home a
year ago in a hot market (Portland, OR), moving from another hot market
(Seattle). I've got no sour grapes, I got the house I wanted and never had to
worry about where I was going to live with my family if the house I was
renting would be sold to someone else and the rent skyrocketed. But I have
seen first hand the real nightmare that the rapid turnover of properties does
to the people that ACTUALLY live in them when the owners treat the property as
a line item rather than someone's house.

It's a double edged sword: tighten financing rules and regulation and you make
it hard for people to 'move up'. Make them overly loose and you get 2008 all
over again. Then again, maybe if it was harder to get jumbo mortgages it would
apply a pressure against unfettered growth of housing prices, reducing the
expected outcomes from speculation. Or it'll just create some other unintended
consequence...

Side note: Having your 9 month pregnant wife watch The Big Short while going
through the mortgage process and being one of 11-15 offers on the first few
houses you looked at is a really stupid idea. So. Many. Tears.

~~~
mythrwy
I hear you and apologies for the rant. Down votes are entirely understandable
as I don't care for radical sounding rants either.

I'm not saying in in the US, nor concretely, but philosophically I think when
a person is born they inherit the right to inhabit a piece of earth. You
shouldn't arrive in the earth and not be able to sleep on piece of it without
paying someone. I guess I feel that land in general belongs to the collective.
And philosophically I'd extend that beyond national boundaries. Just because
someone before us with a gun and a flag, or else a deed and a banknote did
something doesn't mean they increased real estate. It was here before, it will
be here after. So that's just theoretical but it seems axiomatic to me.

I own a home as well. I could sell it now and make money on it. Great. But
then where would I poop?

I guess point is, it seems to me to be both unjust and destructive to have the
essential needs of a place to sleep and raise a family be subject to wild
market forces. Plus I think it discourages actual productive economic
activity. People have a hard time relocating to where there is need partially
because of speculation. So it inhibits the flow of human capital.

I don't disagree at all with your practical analysis of the situation.
Admittedly I have no idea how to solve the problem, and it is a hard one,
particularly now that so much "wealth" is represented. I just don't think it
should have been allowed to get to this point, and I think we need to approach
the problem with an entirely different framework. And I'd say part of that is
realizing the ability to have a place to live and raise a family is an
essential human right and it is sacred and it is many many times more
important than the right of people to build or preserve wealth through paper
ownership of real estate.

Leave wealth building for bitcoin and Apple stock and companies that make
mascara. Or hard work and savings. Not wheat and water and living quarters.

~~~
omegaham
> Leave wealth building for bitcoin and Apple stock and companies that make
> mascara.

The flip side of this - people then complain that we have 25 different high-
tech varieties of boner pills while the developing world is dealing with
antibiotic-resistant infections and malaria. Despite the SV Founder Changing
The World rhetoric, most people are in business to get paid. People go where
the money is.

If you declare that no one should get rich off of bread because it's A Basic
Necessity, you're going to find that the bread biz is going to stagnate while
endless innovation happens in the Twinkie and tortilla chip biz. Some martyrs
who _are_ willing to sacrifice their career prospects to work in bread will
stick around and make process, but the legions of people who are just looking
for a non-shitty job are going to stay far away.

~~~
mythrwy
Yup. That is the problem right here in the real world. Don't disagree a bit.
We've seen what happens with price controls, rent controls, government
subsidies and mandates.

That's why I say I see the problem, not the answer. But I'm pretty sure we can
do better than we are right now. Policies discouraging wealth accumulation
through living quarters might be a good start.

~~~
timthelion
You don't necessarily need price controls or rent controls. You could put a
special tax on second homes which would make renting and investing
economically unfeasible. You could even make it so that speculation was
enabled by allowing the sale of derivative housing futures (a young person
would buy a house at a reduced price, and then have to pay the investor every
time the house's price increased over the next 10 years). That would allow
both investors to speculate and young people to buy.

------
mcv
Houses in "hot" markets still stay on the market for 54 days? In Amsterdam,
you can reliably sell your house in 2 weeks. Some people are willing to buy a
house without a visit.

The housing market here is insane. We recently bought a house and sold our old
one (we haven't moved yet, but remodeling on our new house will start in a
couple of days). We sold our house for EUR 100k over what we paid for it in
2008 (just before the mortgage crisis), and 60k over what our neighbours got
for their nearly identical house less than a year ago. The seller of our new
house got more than 3 times what he paid for it in 1996.

If this isn't another housing bubble, I don't know what it.

~~~
maxsilver
> The housing market here is insane.

This is sort of the problem -- the housing market is insane _literally
everywhere_.

You mention that houses in Amsterdam sell in 2 weeks. Houses in bumblefuck
Michigan are selling _the same day_. It's common here for sellers to do no
showings at all, simply throw an open house on Sunday and say "best offer by
9am Monday wins". These houses all have multiple offers, $20k+ over asking
prices. We're not London, or NYC, or SF, or Boston, or Paris, or Amsterdam.
_Bumblefuck Michigan_ can't even keep their housing market sane.

Pick any city with any half-functional economy. Yes _any city_. The housing
market is insane there. Big city? small city? Popular city? Unknown city? It
doesn't matter -- the housing market is insane there too.

 _Literally everywhere_ the housing market is broken. _Literally everywhere_.

------
rabboRubble
Once the babyboomers start selling for retirement home cash, or dying, many
property bubbles will be popping.

~~~
spaceflunky
You're not wrong, but don't hold your breath.

The average age of the boomers is an spry 67 with a life expectancy of ~85.

~~~
randomdata
67 seems a tad high, no? Babyboomers are generally considered to be those born
from 1946-1964. If we assume an even distribution of people born through those
years, the average would be 62. However, births per year were higher towards
the end of the boom, so in fact I would expect the average age to be even
lower.

------
misnamed
You know the same headline could be written in reverse and still work. Of
course, it would get fewer votes and clicks. The actual bottom line is they
are going for the same size of home ... surely that's not either generation's
fault.

~~~
zeckalpha
People have not made as much of a claim that "boomers are no longer buying
homes and it could cause another housing crash". There's been quite a bit of
press of "millennial are not buying homes and it could cause another housing
crash".

------
jaclaz
I am failing to see an actual "weight" in the matter.

I mean: >Millennials also make up 42% of all homebuyers overall, first-time or
not. And while baby boomers make up a much smaller portion of homebuyers, the
two generations may end up competing for the same type of home, despite being
in completely different phases of their lives.

WHO (which "group" they belong to) are the remaining 58% buyers? HOW MUCH is
"a much smaller portion"? Let's say that the much smaller portion is 25%.

The amount of houses where there is (supposedly) competition between the two
groups is then - at the most - 25%.

And since: >"Millennials buy a 1,800-square-foot home on average, and a baby
boomer buys a 1,950-square-foot home. The other generations are away from
those."

Any home smaller than 1,750-square-foot and any home bigger than 2,000-square-
foot should then not be something these two groups compete for.

How many of these "suitabe size" homes are on the market? Do they represent
25% (or less than 25%) of the total amount of homes? So, what happens to the
other 75% (or more)?

------
mirimir
Well, everyone is competing with everyone else, so singling out these two
groups seems like clickbait.

Still, the article does note that baby boomers are downsizing, whereas
millennials are foregoing starter homes. So one could argue that baby boomers
are outbidding millennials. But I don't see that point explicitly made.

------
ouid
the mortgage interest tax credit is making it harder for millenials to buy
homes.

------
joyofdata
Why do Millenials need a house? How about a flat? And when they can afford it
they just build a house for themselves.

~~~
falsedan
Many people in their late 20s/early 30s are thinking about starting a family,
and have the secure jobs to give them the financial stability they need for
this. Raising small children in an apartment can be pretty stressful, and
given the choice, I think young families would overwhelmingly prefer a house
over an apartment (all other considerations being equal barring price). Plus,
houses generally have 3-4 bedrooms, apartments 1-2.

But: apartments also aren't available! They're just as appealing to the
downsizing boomer.

> _just build a house for themselves_

Where will they work? The places which have cheap land and labor generally are
more removed from the economic hotspots. Or do you propose that they should
take their job with them?

~~~
joyofdata
> Raising small children in an apartment can be pretty stressful

this is precisely the entitlement I was hinting at - I was raised in an
apartment - lots of my friends have been raised in apartments - I do live in
an appartment (*1984) and we have many neighboors with children in our
apartment building.

It is absolutely possible and also very humane indeed also to raise children
in an apartment.

> But: apartments also aren't available! They're just as appealing to the
> downsizing boomer.

And this is just expressing the sad state of the US. The reason why there
aren't enough apartments is not b/c of the babyboomers (also not b/c of
migrants and Mexicans) - it's b/c your government fails to build them (I'm
from Germany). Now you are stuck with a market in favor of people renting out
own flats.

> Where will they work?

Not build at all - just live in an apartment or not move to super-hot-spot
areas like LA or NY. If you can afford to build a house you can afford a car
and you have to commute.

~~~
falsedan
So congratulations on living somewhere that medium-high density living is not
only accepted but seen as obvious! My wife also grew up in an apartment.

The thing is, apartments in the US usually have timber floors (since wood is
so available and cheap), and little insulation (apartments are usually on the
coasts, where the climate is mild).

> _It is absolutely possible and also very humane indeed also to raise
> children in an apartment._

I feel that the social fabric between Europeans is stronger than in the US.
Sure, kids will be fine, but property owners in the US are an entitled bunch
and may feel like their rights are being violated by the pitter-patter/clonk-
bonk of active children. A foot of concrete absorbs a lot more noise than an
inch of timber.

> _it 's b/c your government fails to build them_

Most development in the US is done by private companies; very little housing
stock is built by government agencies. The biggest constraint is building
permits, which is controlled by local government like city councils, which
local residents are elected to, who generally are… baby boomers.

> _If you can afford to build a house you can afford a car and you have to
> commute._

I don't understand this comment. If I live in Nebraska/Detroit (where is is
extremely easy to afford a house & jobs are scarce), do I commute to the Bay
Area? That's days of driving, or getting a pilot's license.

It's the same in Australia: if I can afford to build a house in Bourke, do I
commute to my job in Sydney every day? Even Centrelink says that the maximum
reasonable commute is 90min each way, which (at worst) would mean getting a
place in the Blue Mountains/Wollongong/Gosford.

~~~
joyofdata
well - at the end of the day my message is that the perspective of the article
is misguided.

the problem is not too many baby boomers - the problem is unafordable and
unavailable space to live.

also in Germany this is a topic - resurging in regular intervals. the
nationalistic perspective is "migrants take our flats" \- when in fact its the
government failing to either provide flats funded by the state or influencing
the market to prevent excessive rents and encourage building of cheap
apartments.

it's effectively a more or less intended divide and conquer strategy - have
the people fight each other then they won't fight for changes of the status
quo.

------
CodeWriter23
Millennial whines about how hard prosperity is making her life. Blames another
generation for her woes.

Of course the competition in the market has nothing to do with the trend the
author cites, that Millennials have upset the natural order by skipping the
starter home. Nope, just blame the boomers.

For the record, I'm GenX, and like many from my generation, I hope to be a
homeowner some day.

~~~
saurik
The article explains that they are being _forced_ to skip the starter home
because almost all of the lower end housing stock is only available for rent,
not to own.

~~~
CodeWriter23
Sure, if you just skip over this statement from the article:

"Millennials, on the other hand, tend to overestimate what they can afford in
terms of housing."

The reality in the Bay Area is hyper gentrification driven by the currently
inflating Silicon Valley Bubble 3.0 (or is it 4.0 now) has deleted low end
from the market altogether.

