And it’s pretty stupid, they’re going to sell the house and live where? In the bank with all that money? The houses are going to be expensive for them too!
If a person borrows $100k and buys a $100k house, they will have zero equity. If house prices double, they have an asset worth $200k, a loan of $100k, leaving them $100k in equity. This approach to finance is so common in the US that a 7% dip in housing prices is seem as apocalyptic. You will have people walking away from mortgages, foreclosures, a contraction in the money supply since people will not be able to borrow as much against their assets, and banks will fail from the depreciating homes on their balance sheets and/or aggregate demand will fall. And people who are doing well and very well are mostly just people that were allowed to borrow a lot of money at favorable interest rates.
Remember the joke about how the person who voted for the leopards eating people’s faces party was shocked when the leopards at THEIR face?
If there’s one thing boomers are good at, it’s pushing their luck. They go in with the assumption that THEIR property value will rise and not anyone else’s. Lo and behold everyone’s housing values are high so they probably would be no better off if property values stayed low in terms of net profit.
Since the western “middle class” do not own as much capital as the upper class and have to make most of their living off their labor, they don’t have as clear a path to retirement. Owning a property that appreciates in value is instilled in them as the path to financial freedom.
I think it has to do with the fact that no alternatives are ever presented (pensions are attacked and defunded, social security defunded etc.) so they can’t even comprehend a world where you don’t have to accumulate as much as possible before you hit retirement age.
The house market is the only one that prices are tried to keep artificially hi and everyone is ok with it.
Everyone who already has a house or houses is okay with it.
A real big “fuck you, I got mine”
And it’s pretty stupid, they’re going to sell the house and live where? In the bank with all that money? The houses are going to be expensive for them too!
If a person borrows $100k and buys a $100k house, they will have zero equity. If house prices double, they have an asset worth $200k, a loan of $100k, leaving them $100k in equity. This approach to finance is so common in the US that a 7% dip in housing prices is seem as apocalyptic. You will have people walking away from mortgages, foreclosures, a contraction in the money supply since people will not be able to borrow as much against their assets, and banks will fail from the depreciating homes on their balance sheets and/or aggregate demand will fall. And people who are doing well and very well are mostly just people that were allowed to borrow a lot of money at favorable interest rates.
Remember the joke about how the person who voted for the leopards eating people’s faces party was shocked when the leopards at THEIR face?
If there’s one thing boomers are good at, it’s pushing their luck. They go in with the assumption that THEIR property value will rise and not anyone else’s. Lo and behold everyone’s housing values are high so they probably would be no better off if property values stayed low in terms of net profit.
Since the western “middle class” do not own as much capital as the upper class and have to make most of their living off their labor, they don’t have as clear a path to retirement. Owning a property that appreciates in value is instilled in them as the path to financial freedom.
I think it has to do with the fact that no alternatives are ever presented (pensions are attacked and defunded, social security defunded etc.) so they can’t even comprehend a world where you don’t have to accumulate as much as possible before you hit retirement age.