I certainly see it where I live. Across the street from me are homes which are in the $500k-$1 million range (my neighborhood is nice but more modest) and it is filled with retirees, most of whom built their homes in the period after the 2008 Crash. These were the folks who had money during those particularly lean times. The only people who could get a mortgage. Indeed at least some of these people probably paid cash for their homes. But certainly not all of them.
Behind the Mercedes suvs and well coiffed lawns (such as they are) is, at least in many cases a lot of debt.
And the thing is debt has been cheap for SO long it makes sense, if one can get the financing, to leverage up a bit. This is what the Fed was hoping people would do, and in my little enclave people did it.
But I see cracks in the facade even in this relatively well heeled corner. There is a rise in people offering up parts of their homes in this very nice neighborhood for rent on AirBNB. There are people offering their complete homes, homes they live in, for rent.
I don’t know about you but generally speaking if I buy a home for $750,000, a home I live in day to day, not a vacation place at the beach or something, I am unlikely to want to rent it out to strangers on the weekend. If I had to resort to that I would consider my purchase, one made with low interest rates to boot, to be a big mistake. And yet it appears mistakes have happened (as they always do) even in my well insulated corner of the world.
And these are seniors (to a large degree) who are well off. They survived 2008 without selling off everything and likely have enjoyed the Fed inflated rebound in the markets. These are people also who likely still have pensions. These are good financial risks, and yet the cracks are spreading. Indeed it’s probably starting with the children of these good risks (some of whom were able to take advantage of their parents good credit to buy homes and college educations) and working backward.
And these are the people who are supposed to be “well off.”
(From The Wall Street Journal)
Older Americans are burdened with unprecedented debt loads as more and more baby boomers enter what are meant to be their retirement years owing far more on their houses, cars and even college loans than previous generations.
The average 65-year-old borrower has 47% more mortgage debt and 29% more auto debt than 65-year-olds had in 2003, after adjusting for inflation, according to data from the Federal Reserve Bank of New York released Friday.
Just over a decade ago, student debt was unheard-of among 65-year-olds. Today it is a growing debt category, though it remains smaller for them than autos, credit cards and mortgages. On top of that, there are far more people in this age group than a decade ago.