ELI5: why people say "boomers" ruined the housing market

polaris · · 58 次点击    
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<hr/>**评论:**<br/><br/>trackerFF: <pre><p>EDIT: Since this comment has gotten so much attention, I want to start off by saying: There&#39;s no one group of Boomers to blame. Some came out successful, others are just as screwed as many young people today. It would be wrong to generalize a whole generation. So keep that in mind. </p> <p>It depends a bit on the country, but there are usually some common factors that seem to correlate across the western world. Some of the points below will obviously only apply for Norway, or countries which followed similar policies, but other reasons have been pretty much universal. So YMMV. </p> <p>Here in Norway, the country was a mess after the war. Northern parts had been burnt down, as the Nazis were pulling out, and everything was pretty much in shambles. The gov. countered this with house ownership / building programs, and even started a bank, literally translated to &#34;house bank&#34;. The goal was that everyone should be able to own a house. </p> <p>One way to do that, was to build cheap and fast. As the Boomers became adults, in the mid 60&#39;s / early 70&#39;s, the could afford to buy either used homes, or build new ones. Sure, the interest rates were high, and people ended up paying for their homes a long time...but they COULD do so on a &#34;normal&#34; salary. They could get work straight out of Jr. HS at age 16, and be home owners by they were in their early 20&#39;s. </p> <p>By the time the Boomers were in their 30&#39;s, most owned homes, and were midways on paying it down. We&#39;re now in the late 70&#39;s. </p> <p>Fast forward to the 80&#39;s...Boomers are now in their 40&#39;s, mortgage free, and are looking into new ways of investing their money. Before that, everything was heavily regulated. The Financial markets, the real estate market (at least in Norway). Privatization also spurs up. </p> <p>What used to be subsidized, was now private. Private Banks could finally earn big bucks on handing out loans, and people could flip houses at whatever prices they wanted, people could take out loans/re-mortgaging against their homes. All this, mixed in with high consumption, led people to take out gigantic loans, a building housing bubble, and a subsequent crash. </p> <p>From then (early/mid 90&#39;s), real estate prices have gone up much faster than salaries have, with exception of a small speed-bump around 07-09. Boomers have been able to take out new loans on their first house, and then buy house number 2, 3. </p> <p>Some have been able to sell their old houses with huge profits, and buy stuff that they&#39;d never been able to, with the respect to their incomes. Many will buy their kids their first home, or at least help them, by simply re-mortgaging their house. No unprivileged kid can compete against that. </p> <p>Another important fact is that many boomers petitioned a lot to get various zoning laws and codes in place, that makes building new housing more difficult. You have codes that prohibits new housing, if it destroys view / sunlight / aesthetics / etc. the neighbors. In many places, this makes it practically impossible to build taller buildings. If housing developers send in applications for a modern block building, you can bet they&#39;ll get stonewalled by 20 neighbors, with zoning codes on their side. </p> <p>So, if you ask a 20&#39;something - 40&#39;something around here, why Boomers ruined the housing market, they&#39;ll probably say: </p> <ul> <li><p>They reap the benefits of a <del>solid social-program</del> re-building (economic) program as young, which they then discard/change as they get older </p></li> <li><p>They vote for laws which benefit and encourage hoarding houses </p></li> <li><p>They vote for laws and regulations which make it almost impossible to build new houses at a reasonable price, which in turn keeps their home prices high.</p></li> <li><p>They take out huge loans for consumption, and try to earn back the money by jacking up rents on their house number 1,2,3, etc. </p></li> <li><p>They drive up prices to artificially high levels, because their (then cheap) assets are now worth millions. </p></li> </ul> <p>It&#39;s a long and complicated story. </p> <p>edit: spelling </p> <p>edit 2: </p> <p><strong>Slightly shorter TL;DR</strong></p> <p>Boomers here grew up in a time with good social programs, which would guarantee most homeownership, if they just worked hard and paid their bills. When they got old, they privatized and deregulated those programs, all while making it more expensive to build new homes. </p> <p>Many boomers saw huge profits in home ownership, and started hoarding homes. Buying home nr. 2,3,and so on, and renting them out. When private consumption caught up, they&#39;d just jack up rents and such. When it came to the point that young people were REALLY struggling to buy homes, they stepped in and re-mortgaged their home, or became trustees, so that these privileged kids could put in MUCH higher bids than they could before. </p> <p>Suddenly every other 21-22 year old graduates are bidding 25%-50% higher than ask, because their parents home from 1974 is worth a million bucks. </p> <p>Then they have the nerve to call those left out for &#34;lazy&#34;,&#34;entitled&#34;, etc., and saying that homeownership is not some kind of human right, even though they themselves were helped some 40 years ago.</p> <p><strong>But with that said, it&#39;s a very, very complex topic. They are not the ONLY reason things are expensive...very many places, all around the world, bureaucracy has made it very expensive and time consuming to build anything new. You could of course ask yourself, who came up with that system? Why did they make it so incredibly difficult to build new houses, in the various areas?</strong></p></pre>enigmasaurus-: <pre><p>This little rant is Australia-centric, but... This is what happens when a generation&#39;s only economic plan is to borrow from the future. </p> <p>Our largest, oldest generation has enjoyed a political majority for decades. And with that majority they have enjoyed an unprecedented boom and a record period of prosperity. They have extended their prosperity and comfort by rigging policy in their sole favour, bolstering home investment and - wherever cutbacks have been required - relentlessly targeting families and youth, lest we engage in the travesty of upsetting anyone&#39;s comfortable retirement.</p> <p>So zealous has been this generation&#39;s avoidance of shouldering absolutely any personal economic pain whatsoever, we have clung to many dangerous policies in spite of decades of warnings (you know how we&#39;ve been hearing about the crash for years? Yeah, we&#39;ve also been doing NOTHING to prevent it for years). We&#39;ve fed the world&#39;s most obvious property bubble, baulking at the very suggestion of allowing house prices to ever fall - even a little. At our last election the suggestion prices might drop 2% was met with such a wave of collective Boomer hysteria we were forced to throw the country under the bus yet again. Won&#39;t somebody please think of the portfolios!</p> <p>And so, we continued building and building our idiotic debt pile. Our elders helpfully explained the problem wasn&#39;t them or their selfish, myopic, harmful policy deck-stacking, oh goodness no. It was young people - buying iphones and lattes and avocados. Apparently the young invented consumerism in this fantasy, and of course reality is not admitted into the delusion. We&#39;ve ignored the fact spending on retail, entertainment and domestic tourism has ground to a halt in younger demographics - which are both spending and earning less than past generations. Lost to debate is the fact that without spending, economies also stall. These inconvenient truths aren&#39;t welcome as long as house prices keep rising.</p> <p>Unfortunately - and this is the issue eclipsing all others, there&#39;s a rather fucking important problem with debt: it is consumption brought forward. Without sufficient consumption, the debt pile our aging population sits on is going to drown us. And where does ongoing consumption come from? Taxpayers with fucking jobs. Taxpayers able to afford a basic home to live in. Taxpayers able to gain a semblance of financial stability.</p> <p>If you want to end the property bubble and return this country to a fair playing field (and if we have any hope of restoring economic stability and surviving an aging population this must happen) here&#39;s what you need to do. Stop playing their fucking game. Stop telling yourself the Boomers ruined the housing market: yeah they kinda did, but economic reality will bite them right in the &#34;on paper millions&#34; sooner or later (houses, after all, are only worth what people will pay for them). Stop worrying house prices will remain in a never-ending upward spiral in the complete absence of wage growth. Stop fearing the horde of investors (primarily Boomers and foreign nationals) snapping up properties aren&#39;t going to hit the wall of reality. Stop engaging in the very fear of missing out that keeps you chained to a bandwagon careering towards a cliff. Sit back, make yourself a smashed avo sandwich, and call bullshit on the bubble. That is your best weapon. (Let&#39;s face it, your only weapon.)</p> <p>This bubble is already on life support. Rates are rising, negative sentiment is rising (the media - which just a year or two ago denied a bubble even existed, has gone crash mad), income growth is at a record low and cities are entering oversupply. Yes some investors (mostly Boomer investors, by the way - and on the brink of retirement) are still buying, but who are they going to sell to? Other investors? And who are <em>they</em> going to sell to? A ponzi scheme cannot survive when only investors are buying, and when the median buyer is priced out. It is mathematically impossible for the sheer volume of investment properties in this country to be continually onsold for profit in a market now absolutely flooded with supply in which ordinary home buyers can&#39;t get a look in (and with the banks tightening lending, probably couldn&#39;t buy if they wanted to). </p> <p>Speculators bet on the direction of prices, and prices (though they can rise irrationally) are still tethered to market fundamentals like incomes (not growing in Australia), physical housing supply (notice a few hundred fucking cranes and apartments in your city lately? Who&#39;s going to buy these now banks won&#39;t lend to foreign investors and values are falling?), rental yields (record lows), population growth rates (diving)... fundamentals and sentiment have de-coupled but fundamentals represent the true picture of market demand. Fundamentals are reality. We will be returning to that reality the second our positive feedback of manic sentiment turns into a self-feeding snowball of negativity (which, arguably, is already happening). Sentiment is the only pin that matters in a bubble we are waist deep in dead sentiment canaries here in Australia.</p> <p>So keep calm and call bullshit. The trouble with bubbles is there is an inescapable point where everyone realises value is a mirage. A point where people realise tulips are just shitty fucking flowers. A point where our Boomers will come to understand houses are four walls and not million-dollar ATMs - that capital gains only happen for as long as our dwindling pool of buyers are both willing and able to pay more. A point where our Boomers will realise that if all owners become investors, you have nothing going on but one giant ridiculous circle-jerk. Due to oversupply, the investors in this country are basically borrowing millions to a play game of musical chairs in a room with more chairs than people. Oh, and the chairs are all negatively geared, so without capital gains are <em>making an annual loss</em>. Many on interest-only finance too, our very own impending little sub-prime crisis.</p> <p>We will reach a point soon where our underemployed youth, starved of financial security, saddled with the debts and excess of our idiot forefathers, and living on a dying planet, will become the voting majority. </p> <p>The youth will remember (especially when we&#39;re considering whether our insanely generous Boomer-drafted pension scheme is going to work...) </p> <p>Yes this was adapted from by own previous post (that&#39;s how much I love ranting about this bubble...)</p></pre>Laser45: <pre><p>Zoning is the enemy of millennials, and they just don&#39;t realize it yet. </p> <p>In Australia, there is an enormous housing bubble, because when demand started to outstrip supply (in the mid-90&#39;s), baby boomers who owned houses in the inner city blocked any higher density development. Australia has large Asian migration, who tend to like higher density walkable living, matched with an emerging millennial market who like the same. </p> <p>A decade of under development built up a runaway housing bubble. By the mid 2000&#39;s the government realized how much they had screwed up (or new development got so lucrative the developers were able to buy them off), and apartment building took off. </p> <p>By this stage, it was too late. The average person believed that owning real estate makes you rich, and development has still not dampened demand a decade later (just created a lot of empty apartments for investment purposes). </p> <p>In the US, cities have significantly higher taxes on multi-unit development (that millennials want), vs suburban sprawl. They label these taxes &#34;Affordable Housing Ordinances&#34;, ie the money goes towards affordable housing. In some cities, a developer of new apartments must pay up to 20% towards affordable housing funds. Developers of suburban houses have no such tax. This is because boomers (often running local government) like houses on the fringe of cities, and millennials who don&#39;t have a lot of political power yet like walkable communities. </p> <p>This led to only ultra luxury multi-unit developments being viable with the additional taxes. So wealthier millennials are doing fine, but middle class millennials get squeezed by housing. </p> <p>Then you have cities in the US like Chicago which is completely broken by zoning, in order to enrich local politicians. If a developer wants to build something outside the zoning, they need the alderman (local politician) to personally approve it. Aldermen down-zoned almost the entire city to single family homes, even complete neighborhoods currently full of 3 flat and 4 flat buildings. This means the current structure would be illegal to be built today, and developers cannot build new structures without the alderman personal approval (ie contributing to alderman funds / lobbying). This benefits baby boomers who already owned real estate, and disadvantages millennials yet to enter the market by restricting supply. </p> <p>TLDR: Avocadoes</p></pre>todjo929: <pre><p>The responses here are all very similar. No one has really raised the wages side of things. </p> <p>Back when boomers were contemplating a house, the typical house cost 4x gross salary (obviously depending on which country, city etc). So to get a responsible 20% deposit, you needed to save 25% of your income for just short of a year. </p> <p>Interest rates were high, but the servicing costs were relatively low - the loan amount was 80% of 4 years salary. </p> <p>After things like the 87 stock crash, when interest rates started to decrease, housing was touted as a great investment. It was bricks and mortar, the price didn&#39;t fluctuate daily and it certainly didn&#39;t show that it went down 8% one week and up 9% the next like the sharemarket can. </p> <p>Boomers drew equity from their homes which had steadily increased in value to buy investment properties, which in turn increased their prices and so forth. </p> <p>To the point where it&#39;s a massive issue now - and in some places (Sydney Melbourne and Auckland in my corner of the world) the price to wage ratio is closer to 12x. Referring the the original premise that you need a comfortable 20% deposit, that&#39;s saving 25% of your income for just over 10 years. That&#39;s scary in itself, but property prices are increasing faster than inflation and wages. So you need to save faster than 25% to make any progress. And more than 40% of city dwellers in Australia are in rental stress - i.e. Paying more than 30% of their income on rent. So it begs the question - if you pay 25% average tax, 30% rent and are supposed to save more than 25% for 10+ years - how the hell is it supposed to happen?</p> <p>Boomers ruined the housing market - but they also fucked the job market. </p> <p>And don&#39;t even get me started on how 22 year old graduate from university with a mortgage already - they didn&#39;t have to pay for theirs.</p></pre>bbqroast: <pre><p>Boomers were buying houses at a time when the income to house price ratio was very good for a buyer, combine this with many government incentives and they had great chances of buying a home. </p> <p>My dad for example bought his first apartment in London at the age of 20, while working in a paid internship. </p> <p>Today house prices have risen incredibly fast compared to wage growth, so young people can&#39;t buy homes as easily. Comparatively boomers already own a home, and in some cases have made an awful lot of money off of the price rises.</p> <p>This has bred a lot of contempt for older home owners, and at the same time there&#39;s been a kickback with some out of touch people saying that the youth today are just wasting all their money/not working hard enough/etc which just feeds the fire.</p> <p>If boomers actually caused these price rises is a more complex matter. The general problem is that we&#39;re just not building enough homes to keep up with demand (this isn&#39;t true everywhere), although demand isn&#39;t actually that high (there&#39;s a reason we call that generation the &#34;boomers&#34;- it was one of the biggest explosions in population that the developed world has seen).</p> <p>IMO the current problem is regulation, in the mid 1900s cites started aggressively adopted new zoning codes. Every new code either raises the cost of compliance or limits the number of units in a area, often both. The end result is that eventually demand exceeds supply, and given the necessity nature of housing, prices go flying. </p></pre>bu_J: <pre><p>5 year-old Billy wants to buy a new Lego set, but because her mummy and daddy can&#39;t afford to buy it for her, she&#39;ll have to save up her pocket money from her job down the mines. But as much as she saves, why can she still not afford the Lego set she wants?</p> <p>Say hello to that arsehole 18 year-old Chad (the baby boomer). When he was 5, Lego was cheap as hell, and he was getting pocket money like nobody&#39;s business. He was even getting Lego given to him on, like, every single birthday and occasion, and even at his siblings&#39; and friends&#39; birthdays! This allowed him (and his friends) to stockpile <em>ALL</em> the Lego. </p> <p>So because Billy and her friends can&#39;t afford the full Lego set, Chad lets her borrow a few bricks in exchange for her pocket money. He then saves up all the extra change he&#39;s getting to buy the new Lego sets, and on top of that mum and dad have all sorts of rules (and regulations) on the amount of Lego allowed in the house; so Lego prices go up more quickly than Billy&#39;s wages from working down the mines. Billy will <em>never</em> be able to afford her own full Lego set.</p> <p>Billy has become a permanent borrower, relying on her pocket money to rent Chad&#39;s Lego while he builds up his own collection. Chad says she&#39;s lazy, and if she just worked harder and longer down the mines she&#39;d be able to afford her own Lego, just like he did when he was her age.</p> <p>Chad - what a grade A cunt.</p></pre>AssholePhilospher: <pre><p>The simple answer is that baby boomers have had majority control over much of the world for several decades, so poor political and economic decisions during that time are mostly their fault. </p> <p>In more detail baby boomers benefited from a time of greater US and world prosperity as well as lower population density and higher resource availability and have accumulated more wealth as a result. </p> <p>Oddly the boomers still don&#39;t seem to realize that, those &#39;good old days&#39; from the 40s to the 70s, were dominated by Democrat policies. Their parents were much more responsible than the boomers, who&#39;ve had pretty easy lives in comparison. </p> <p>Generation Y and X have also had it pretty easy since they&#39;ve lived on the boomers piles of cash, but it&#39;s important to realize it&#39;s really the Baby Boomers parents who set the foundation for prosperity. They were the ones in power during the 50s,60s and 70s. As well as the Silent Generation, but I kind of don&#39;t count them ;)</p> <p>It&#39;s during the 80s that baby boomers all fully mature enough to start voting and by the 90s they&#39;ve all well out of the 20s. </p> <p>Boomers are from 1940-1963, it&#39;s a series of baby booms. </p> <p>They appear to create a significant increase in crime. I suspect this is being fueled partly by De-segregation/equal rights and Vietnam among other things. It could also be an increase use of all kinds of new drugs at higher levels, such as heroin and eventually including crack in the 80s.</p> <p>Later generations would prove to raise population levels, but lower crime rates and drug use rates, meaning they are more well behaved than the boomers were. </p> <p>Boomers lived in an easier time of greater prosperity where gas was 25 cents a gallon. Jobs were plentiful, even to people without an education. They are kind of all spoiled kids who never had to go through anything too serious. </p> <p>They had no World War, until 2008 they had no major economic instability other than the 70s oil embargo and some minor 80s hiccups. They did have the draft and Vietnam, but all in all that only impacted a small fraction of people. More importantly they were able to get jobs, even to the point that woman start rapidly rising in the workforce. The basis of a good standard of living has to be job availability, work conditions and wage vs cost of living. The boomers inherited prosperity from their parents, but what they&#39;ve left for the next generations is a TON of debt and infrastructure that&#39;s years out of maintenance. By the time generation X starts voting the US is spiral into debt and running record deficits almost every year. By the time the oldest of Generation X is getting out of their 20s you have 911 and then the 2008 crash, creating 16 years of poor economic and social conditions.</p> <p>*<em>Generation X and Y never really had a chance at anything like the prosperity the Baby Boomer were handed. *</em></p> <p>I believe that&#39;s why boomers have a tendency to act over privileged and intolerant. As a generation they&#39;ve never really been humbled or tested, they were born into an overall economic boom that lasted most of their lives. It wasn&#39;t until 2008 they saw their first glimpse of reality as the foundations their parent laid for them began to erode. </p> <p>My theory is if you get things too easy in life and don&#39;t go though enough challenges, you generally wind up with poor decision making skills because you&#39;ve been insulated or buffered by the success of your parents or generations before you. Even if you do work and you get paid too much for your skill set, you become lazy and out of touch with reality. Your views of the world become easily skewed, not entirely unlike the class divisions we saw with Europe&#39;s Aristocracy. Then one day, they realized they had lost power and there was no going back.</p></pre>vegaseller: <pre><p>I am a millennial who just hit 30 and has problems buying a house despite making 6 figures and saving close to 20%. </p> <p>A lot of you are on the right path and looking at supply and demand questions but as someone who studies financial/economic history, I believe the true nature of the baby boom is being misunderstood. I want to suggest an counterintuitive way to look at things. </p> <p>There is a reason that housing prices kept going up over the past 3 decades above inflation, stock prices are trading at 30x PE, only lower than 1929 and 2000 and you have ZIRP in much of the world. At its heart, all financial assets are inevitably tied to the interest rate, as interest rates represent the real trade off between money in the present versus money in the future. To see how interest rate effect the price of a financial asset, one just needs to understand some simple math: say you have an annuity that generates $100/year, at a 10% interest rate, this annuity stream is worth $1000, but at a 2% interest rate, this annuity stream is worth $5,000. As you can see, a huge part of the increase in asset prices: in everything from stocks, bonds and real estate comes from the fact that interest rates have fallen to the lowest in perhaps thousands of years. </p> <p>Now when I say interest rate I don&#39;t necessarily mean the 10 year fixed income note but as the intersection of supply and demand for money. Quick economic background of the 1950s: The world economy was destroyed and the capital base was decimated, there was a lot of demand for capital and very little supply, so the real rate of interest was quite high (think of this as the return demanded by investors to part with their cash for cash into the future) despite government bond rates during this time being suppressed to help with war time debt servicing. This was the world the boomers were born in the 50s, very high return on investment (thus low asset prices, remember interest rates are the inverse of asset prices). There was just massive demand for capital on building everything from QSR restaurants, drive-on theaters, auto dealerships, department stores, etc, to service the baby boom generation. The world we have today is actually the exact opposite of when boomers were born, demand for capital is low (companies are buying back shares instead of investing), supply of capital is high (witness all the overseas buyers) as a result asset prices are high and getting higher because of this supply and demand dynamic for money. </p> <p>Now we can theorize the reason for the low real rates of interest. But my believe is that secular stagnation thesis (take a look at Japan) probably contributed to some extent. After all, you don&#39;t need to keep building out manufacturing or distribution if you suspect there are less people to sell to in the future. One other factor may be that innovation is slowing. Generally despite the massive increase in innovation in information technology, much of it is not showing up in the productivity numbers or in other industries. In the 1950s, we had the rise of auto, the airline industry, petrochemicals, electronics, computing, television and many more. Detroit was actually a hub of innovation for auto related technologies. Today we just have silicon valley and parts of Seattle and Boston, which only creates a couple of million jobs at most. The biotech revolution I believe is greatly exaggerated by the press (I studied Bioengineering).</p> <p>I suspect a lot of this is that old people are just extremely risk adverse, so they refuse to change and this has filtered in to all parts of government and industry. As a result, we don&#39;t have as much innovation and dynamism, this results in too much money chasing existing assets rather than being deployed on new innovation and entrepreneurial endeavors. The spirit of the young is in trying new things and envisioning new things that have no yet come to be, and that has been stifled at all levels. </p> <p>The other things people talk about like greedy, corruption, political polarism have always existed in society and is a controlled factor.</p> <p><a href="https://etherealvalue.wordpress.com/2017/03/21/secular-stagnation/" rel="nofollow">https://etherealvalue.wordpress.com/2017/03/21/secular-stagnation/</a></p></pre>ZachMatthews: <pre><p>Let&#39;s look at this another way. I&#39;m in my mid 30s and trying to move houses right now, so I&#39;ve been staring at the market all year. I live in Marietta, Georgia and want to move into Roswell (which is &#39;so hot right now&#39;) because it would be halfway between my job (in Alpharetta) and my wife&#39;s (in Marietta).</p> <p>First of all, in 1950 the population of the United States was 140M. Today it is 321M. In other words it has more than doubled during the lifetime of the Baby Boomers. A lot of the economic stress we are feeling in our years on this earth has to do with overpopulation.</p> <p>Let&#39;s look at a good historical example. In 1300, on the eve of the Black Death, England&#39;s population was 3M people. They were stuck in an agrarian model that had been left to them by the late Romans, when the money economy broke down and everyone moved onto a self sufficiency/barter economy, which directly undergirded feudalism. If you had 20 guys who did whatever you told them to and the police and local authorities all moved out, think about the kind of sweet little kingdom you could set up. That&#39;s what happened on a micro scale across Europe.</p> <p>The average man working in 1300 was a peasant farmer who owed taxes to his feudal lord in the form of a good chunk of the grain or livestock he could grow in a given year. He ate pottage, which was a kind of always-bubbling cabbage/pease soup that was perpetually replenished over the fire. Luxuries included things like meat and salt. He did not have wi-fi. And worse, his father and his father&#39;s father and their fathers before them had all been legally captured in the same role for hundreds of years. This was because populations had slowly grown and land ownership had become increasingly divided. Feudal lords had no incentive to allow serfs to leave the land they worked to the lords&#39; benefit. Wages were fixed, to the extent wages were paid at all. Everyone lived in the same family hovel they had owned for generations. Life sucked.</p> <p>Then in 1349 a nasty bacteria swept through that we call the Black Death. Yersinia pestis. And populations crashed. England in 1350 had 2.4M people and the plague was just getting started. Most estimates have total mortality at about 40% over a fifty year period. It wound up being the most important economic boon in Western Civilization.</p> <p>The loss of population ultimately returned the West to a money economy. Feudal lords could no longer hold the serfs on the manor; they lacked the manpower themselves, and meanwhile the serfs had legitimate opportunities in the cities or on other manors. They suddenly had the freedom to negotiate; to innovate. Massive amounts of labor and intellectual capital which had been logjammed on the fiefs broke free, and Europe exploded in an intellectual Renaissance which we are still living through today. The &#34;Moore&#39;s Law&#34;-style reality of technology rapidly accelerating during one lifetime got its spark in the 14th century and has only sped up since. In classic sociological terms, Europe had hit a kind of Malthusian boundary and the loss of life broke everything loose. Through technological innovation (better planting methods required by the lack of labor) and intellectual innovation (the rise of modern fertilizer-based farming), the old Malthusian boundary was erased, and populations exploded.</p> <p>The same thing happened during the Baby Boomers&#39; lifetime. The <a href="https://en.wikipedia.org/wiki/Green_Revolution">Green Revolution</a> of the 1960s is credited with saving a billion people from starving. Laudable. But those billion people are still with us, and they also are reproducing. As modern medicine has cut mortality rates early in life to near nil, more and more people are being born and actually growing up to want houses. The United States did not double in population in 50 years based on same-citizen reproduction. Many of those 1B mouths came from other parts of the world and moved here. (I am not anti-immigration but this is a mathematical fact). Ultimately, all those people want houses.</p> <p>So as we sit here today in 2017 we are entering a new Malthusian limit, although we are probably just on the leading edge of the crunch time that&#39;s coming. Moreover, demand is not evenly distributed. There are lots and lots of awesome lots available for cheap in Montana or Alberta, but people don&#39;t want to live there because there is no work there. We are experiencing the same crush to get into the cities that economic forces created when the serfs broke free of the farms in the 14th century. Some of our &#34;serfs&#34; are former wage slaves from inside the United States, children of factory workers or farmers now entering the middle class. Many of our &#34;serfs&#34; are people who broke off the farm in other parts of the world, like Central America or Asia. Everyone wants to be where the opportunities are, so they crowd the best places.</p> <p>And that is the primary reason why I can&#39;t find a one acre lot with a new home on it in Roswell, Georgia. There are no one acre lots any more. Most of those older spaces that used to have big lots are being cut into smaller and smaller pieces -- townhomes akin to those built on the northern fringes of London in the early modern period. </p> <p>Who owns those nice homes? Well, the Baby Boomers do, and those houses are starting at about $850,000 and going up to the mid seven figures right now. The Boomers are on the back end of their economic primes; they spent the last 30 years accumulating all the capital one needs to buy nice big houses the rest of us envy. But their presence there is more coincidental than causative. They are simply in the first places in line, due to their age and income, so they have first choice, for now. They will die and then Generation X will be the ones with the nice houses, and then the Millennials, but at the rate we are going the number of Gen-Xers or Millennials who wind up in those houses will proportionally diminish, because demand is ever-increasing.</p> <p>Tl;dr: The problems we face in the housing market are fueled by demand. Demand exploded with population. Prices increased. The Boomers own the nice homes because they are old and have money, but they are not the problem. Reproduction rates above 2.1 are the problem.</p></pre>Sir-Drake: <pre><p>I agree with everything here but would expand for Aus. The boomers turned the housing market into an investment market. They have used their voting control to maintain negative gearing, increase foreign investment, under tax their primary earning years, destroyed the unions/ local jobs, and then told us we just need to get better paying jobs. </p> <p>Its a kick in the teeth when we&#39;re going to be supporting a lot of them through their old age pension years because their multi million dollar home isnt counted in the welfare test.</p></pre>Nectomancer: <pre><p>US: Because banks started doing exactly the same practices that got us into the Great Depression: they allowed (and encouraged) banks to approve loans to people who were not likely to pay it back. A solid housing market is usually the first sign of a healthy economy and in the early 90&#39;s the government could see our economy was starting to falter. Work streamed out of the country making it harder for citizens to repay their debts-&gt; less investing -&gt; less profit for investors to loan investees-&gt; downhill spiral. The American government decided to remove Deprrssion Era laws that restricted who could qualify for loans (one of which was the Glass-Steagall Act). The benefit was that there were more investees and investors could profit on loaning for mortgages once again, the bad part is that a higher percentage of people were likely to miss payments or simply not pay altogether which is an enormous loss for investors because it ties up money stopping them from re-investing. What didn&#39;t help was that many mortgage companies began to take advantage of variable interest rates that could offer low incentive rates to gain loan customers and then hire their interest rates to double digits. Fast forward to the early 2000&#39;s, the ability to make money on these investments spurred people to buy since credit funds were so available particularly for mortgages. With more &#34;money&#34; available, people could offer more money for houses which amplified the actual cost of the house and meant you could end up paying far more than the house was worth because someone else was likely willing and happy to pay whatever the seller wanted for that house. This created a bubble where the value of the property was not worth what was being paid for it however the profit off of good investments freed up more money to cover even for people who made bad investments; but this was a flawed and fragile system. The government decided not to raise the value of the dollar to match inflation which means the entire value of the dollar was less than expected returns. All high level investors realized their investment in American dollars was not as secure as they hoped so they started to sell US currency making it lose value. Translated to the US economy, the cost of everything started to hike because the currency meant less globally and in this scenario the big ticket items suddenly became more expensive while loans became less available. From here there was no turning back from our economy and the recession we should&#39;ve felt in the 90&#39;s came full force and crushed our economy as people who could no longer get mortgage loans to support mortgages on properties which were being sold to fund a new mortgage loan began to collapse like dominoes. Almost overnight the fragile housing bubble burst and property became worthless. Brash investors had almost no claim on their investments as banks repossessed thousands of houses at a huge loss to investors which diminished the incentive for loan companies to give out loans to anyone with questionable credit. On a wider scale, the heavy losses in one part of the economy prompted investors in the stock market to pull their money out which in turn lowered the amount people were investing making more people pull out of the market... and thus the Great Recession happened. </p></pre>iamjacksua: <pre><p>The baby boomer generation is blamed for ruining the housing market because a lot have used their substantial political sway to try to prevent the prices of their homes from ever falling. When house prices are artificially high, it is harder for younger people to buy a property, and they are at the mercy of landlords that can charge high rent (because buying is not an option).</p> <p>I personally think it is more complex than that. While boomers did get the increased home mortgage interest deduction, and prop 13 here in CA, I think the blame really falls on the people at the controls that create property bubbles, and city policies that limit building additional housing. Property bubbles make housing unaffordable, create equity on paper (causing more reckless spending), and make a giant mess when the bubble bursts. Cities that limit building additional housing keep supply low, which makes prices high.</p></pre>Filthyrichdude: <pre><p>Although all the other answers are right, I wanted to add a little example. I know of multiple married couples that, as a side job/hobby, flip houses for thousands of dollars. They buy usually alright-ish houses in lower/middle income neighborhoods, then they proceed to update all the fixtures and appliances, install new heating and AC systems, repaint and re carpet the house. This is a problem because, well, the prices of houses are going up. So if you take a house that a low income family could afford, then &#34;update&#34; it and sell it for tens of thousands of dollars more, it reduces the amount of people able to purchase that house.</p> <p>It&#39;s like if McDonalds went from a dollar menu to a 2 dollar menu. Madness ensues because the amount of people that can afford 2 dollars is way different than those who can afford just 1. </p></pre>pseudocultist: <pre><p>Gentrification also pushes entire communities out of the neighborhoods they&#39;ve owned for generations. I&#39;m a white gay guy living in a black neighborhood, everyone is worried my appearance means the neighborhood is about to fill with gay couples flipping houses. It&#39;s a short-term positive for the property owners when this happens as they get a cash payout higher than their equity, but their kids then have no house to inherit.</p></pre>Openheimerdinger: <pre><blockquote> <p>I&#39;m a white gay guy living in a black neighborhood, everyone is worried my appearance means the neighborhood is about to fill with gay couples flipping houses</p> </blockquote> <p>God forbid a ghetto fills with gay dudes making properties look better and improving the socioeconomic status.</p> <blockquote> <p>It&#39;s a short-term positive for the property owners when this happens as they get a cash payout higher than their equity</p> </blockquote> <p>You mean like an investment?</p> <blockquote> <p>but their kids then have no house to inherit.</p> </blockquote> <p>What does that even mean? Nothing stops you from just keeping a property that you fix or mortgaging another one.</p></pre>pastryfiend: <pre><p>If the taxes on that gentrified neighborhood get higher than what the people who have been living there a long time can afford, that is a problem. Some will stay and get behind on taxes and lose the house, others will sell for a profit and try to find an area that they can still afford in their city.</p></pre>Openheimerdinger: <pre><p>So then maybe put the blame on liberal-run localities who stifle growth by taxing people for private improvements?</p> <p>This libertarian perspective triggers some people, but if you&#39;d rather downvote my shit without realizing that gay people living fancily and minorities living in a less hobo-piss area can both be accomplished simultaneously, then go ahead.</p> <p>The only other theory is that the people doing the gentrifying <em>want</em> minorities to leave so they can pretend to give a shit about them from a distance.</p></pre>pastryfiend: <pre><p>Calm your tits! I&#39;m not down voting anything. Seems like you read a lot more into my post than was actually there.</p></pre>Openheimerdinger: <pre><p>It&#39;s ok, people have a lot of opinions with zero knowledge of construction or real estate.</p></pre>pastryfiend: <pre><p>Enjoy your anger and assumptions about my life.</p></pre>: <pre><p>[removed]</p></pre>Teekno: <pre><p>Your comment has been removed for violating Rule #1:</p> <p><strong>Be Nice</strong></p> <p>Consider this a warning.</p> <p><em>Stay respectful, civil, calm, polite, and friendly. ELI5 is a forum for people to request help understanding complex concepts, and share explanations, without fear of judgement. Don&#39;t insult people or their good intentions, in a post, comment, PM, or otherwise, even if a person (or another subreddit) seems rude or ill-informed. Remember the positive spirit of ELI5.</em></p></pre>Crafty131: <pre><p>It does depend somewhat on where you live. The ELI5 version for Australia is this: </p> <p>There are very generous tax concessions, which, along with low interest rates for borrowers, make investing in real estate a very good investment compared to other types of investments. This means there are more buyers competing against each other. Increased demand means increased prices. It also means first home buyers, who are usually trying to buy a house to live in and not an investment, get beaten to properties by investors, all the while prices keep rising. The reason Boomers get blamed is because they are the most common group of people in the investor category.</p></pre>digitek: <pre><p>Mortgage interest rates is perhaps the biggest issue facing affordability. In the 1980&#39;s interest rates topped out over 18%. Interest rates were so high people used their credit cards for part of the down payment because their credit card rates were lower.</p> <p>Contrast that with the last decade which has not only seen sub 4% rates on the same 30 year fixed, but a huge spike in shorter term mortgage rates (ARMs) - which lower the monthly payment even further on a smaller timeline (3,5,7 years). Compound that with post-2008 collapse and banks are also looking for a much more strict down payment to protect themselves against a future house market slide.</p> <p>The result has been an inflation of home valuations because affordability is much higher on a monthly mortgage payment once buyers are &#34;in&#34; for at least 20% of the house price. While a 300K mortgage in the 1980s would top $4K/month, today, it doesn&#39;t even break $1500 on the same 30 year fixed payment, or as low as $1100 on an ARM. Or to put it another way, the same payment today could afford a house nearly 3 times as expensive (even after accounting for inflation).</p> <p>As a result first-time home buyers are in a tough situation - the down payment is much higher to stick with the same responsible mortgage their parents had, or they enter riskier options with short-term interest rates and have to pay things like mortgage insurance as well. </p> <p>So I wouldn&#39;t say the situation was caused by boomers, but the various economic changes over the last 3 decades that have lead to significant changes in home purchasing and monthly payments.</p> <p>Edit: Added inflation and house comparison</p></pre>dbadefense1990: <pre><p>I don&#39;t know if other country&#39;s Boomers followed the same trek, but American Baby Boomers were notorious in the 1970s/1980s (when they were in their 20s/30s) for proposing and passing anti-taxing legislation, deregulation of banking and other monetary industries, and laws softening the ability to use credit to finance. The low interest rates for a mortgage coupled with paying virtually no student loans made Boomers the prime generation for housing to begin with. California&#39;s Prop 13 is the best example of Boomer&#39;s &#34;tax revolt&#34; which pretty much saved their homes at the complete decimation of the state&#39;s education system.</p> <p>Then with all their assets acquired, Boomers sought to assault younger generations into preventing them from acquiring wealth they often got so cheaply. Baby Boomers pretty much bullied Gen X into toxic subprime mortgages (the trigger point of the 2008 economic meltdown) while bullying Millennials into taking student loan debts while trying to pay a 20% down payment on a minimum wage, non-union job.</p></pre>Cantfinduser: <pre><p>As far as the US goes, many responses thus far are right about rapid population growth affecting the supply of affordable housing, but there is also a political element. The boomers were born post WW2, in the 40&#39;s and 50&#39;s. They inherited a society that was thriving off of FDR&#39;s new deal. High income taxes paid for quality educations, infrastructure, arts job programs, a massive expansion in government jobs, and other socialized benefits that boosted the middle class (social security, Medicare etc). Boomers became politically aware/active in the 60s and 70&#39;s, sparking resistance to the Vietnam war, the civil rights movement, and the sexual revolution, which saw unprecedented civil liberties open up for them. This generation came to understand they held incredible political power as a voting bloc. In the 1980&#39;s, when the boomers were educated, working, owning homes and raising families they overwhelmingly elected Ronald Reagan for president. Reagan&#39;s platform sought to dismantle the social programs that had enriched the middle class, in exchange for across the board tax cuts. These tax cuts primarily benefited the wealthy, but it was argued wealth would &#34;trickle down&#34; through society, as the wealthy opened more businesses and spent more.</p> <p>The Reagan revolution has created a more stratified wealth profile for the United States, minimum wages haven&#39;t kept pace with inflation. Government jobs, and public education spending hasn&#39;t kept pace with population growth, there has been less infrastructure spending and etc. In this way, millennial generations have entered into adulthood and found a society with a reduced middle class, and are unable to afford housing. And in this way, many millennials feel the boomers have benefitted from the high taxes their parents paid for a social safety net, then turned around a voted for low taxes for themselves.</p> <p>The Reagan platform of dismantle, deregulate and cut taxes was widely adopted by the Republican Party, even moderate Democrats such as Bill Clinton have been swept up in fiscal conservatism. Clinton oversaw the beginnings of deregulation in the banking and housing markets that led to the subprime lending bubble, and tanked the economy.</p></pre>PartyDad69: <pre><p>Boomers have steady income and ample collateral to get loans with low decent rates. </p> <p>A go-to &#34;safe&#34; investment for the last fifty years has been real estate, so boomers are storing their savings in property generally, living in mortgaged properties or purchasing property with debt as an investment. When it works, the rental income pays off more than the mortgage rate, providing them a net profit. </p> <p>The more money that can be generating from buying/renting/re-selling real estate, the higher the demand will be for real estate as an investment, driving the price up since people are more willing to pay higher prices. </p> <p>Non-boomers are left out many times, since job security, room for growth, and entry-level salaries don&#39;t offer the same buying power that boomers had at a comparable stage of life in a different economy. </p> <p>Millennials and such are also less trustworthy of real estate as an investment, leaving older, more well off individuals as the majority of buyers in the market. This is a good and bad thing, since a healthy distrust of financial institutions is generally good, but this also contributes to millennials renting at a higher rate than past generations, driving the cycle of credit worthy boomers buying property to rent at monthly rates higher than one would pay on a mortgage. </p> <p>Source: Am millennial working in Corporate Finance that is saving to buy a house. </p></pre>mortemdeus: <pre><p>Short and sweet. Boomers bought cheap homes. Homes increased in value. Boomers paid off their homes. Boomers took loans against their now more valuable homes to buy other cheap homes to rent. Homes started losing value. Boomers got pissed and passed regulation to maintain their homes value. Homes gained more value. Boomers took out more loans to buy more homes. More homes were built to keep up with demand. Boomers home values fell again. Boomers got pissed again and passed more protectionist laws to preserve their home values. Home prices went up. Boomers got older. The market crashed. Boomers emptied their 401k&#39;s into the housing market. Housing prices rose. Building came back. Boomers passed even more restrictive building laws to preserve their homes value.</p> <p>Now it costs a fortune to build a new home and only luxury homes can be built because no neighborhood will allow the cheap houses boomers had built to be built. Rental property is also impossible to build because boomers are now landlords and the competition would sink them. Nobody wants to harm grandma and grandpa so we chug along letting them drain income from newer generations.</p></pre>TenaTurner: <pre><p>so whats gonna happen when all the old people with houses die? I heard there werent even be enough people in the US to buy the properties since the boomers were bigger than any subsequent generation. IS that true? Will the market collapse then?</p></pre>pbrettb: <pre><p>People say &#39;boomers&#39; ruined the housing market and the world economy in general, such that younger people have had their prospects diminished. I think that the fact is simpler and more complex than that. There are 4 times as many people on the earth as when the boomers got started. There are so many people there is not enough space or resources for everyone, and our attempt to continue to live as if there is is killing the boomers, the millennials, and the whole planet. The millennials tend to think that the boomers did it to them somehow, and they did, but by having way too many millennial babies. Who are continuing their own exponential growth. I&#39;m guessing a couple generations later, if any humans survive then and that is not a given, will be in much worse condition and will blame the millennials for it.</p></pre>applebottomdude: <pre><p>British millennials are £2.7 trillion poorer because of deliberate decisions taken by their parents&#39; generation</p> <p><a href="http://uk.businessinsider.com/british-millennials-poorer-interest-rates-pension-plans-2017-2">http://uk.businessinsider.com/british-millennials-poorer-interest-rates-pension-plans-2017-2</a></p></pre>socialcommentary2000: <pre><p>In the United States, at least, they got to buy into the housing market after WWII when it was dirt cheap, even adjusted for inflation, to homestead in any places one would want to. They also had the benefit of many American cities being left for dead due to various socio-economic factors that drove everyone to the suburbs, so they could hold properties there for peanuts as well. </p> <p>Now decades have gone past and that property that was bought for around 100K (adjusted) back in 1972 is now worth 800K and if a young person wants to homestead the math doesn&#39;t work. Set aside the fact that any middle income person is going to be subjecting an intolerable percentage of their income just to housing, they&#39;re not going to get 4 million dollars for that house in 30 years barring some sort of bizarro hyperinflation scenario that pushes the average salary for a middle class person to several hundred thousand dollars a year...while simultaneously keeping everyone employed.</p> <p>This means, effectively, that most people raised in a working middle to full middle class household cannot reasonably follow the &#39;guidebook&#39; on proper middle class living (e.g...get an education, buy a house and homestead, raise a family..) without lucking into a high paying position. Boomers straight didn&#39;t have to rely on that luck nearly as much to fulfill the American dream. Oh and the labor market is in a state of perpetual downward pricing pressure to boot due to the inherent operation of capitalism.</p> <p>Now, all of this would be what it is and just lamentable...but Boomers never shut the f*ck up about how young people &#39;just aren&#39;t working hard enough.&#39; Which is complete garbage. They&#39;ve basically deluded themselves into believing that the time they lived in, when there was enough inefficient slack in the system and prices were low enough so that they could get paid and didn&#39;t have to get lucky, is how things actually are..not just how they happened to be when they were in that time of their lives.</p></pre>twoLegsJimmy: <pre><p>Little related anecdote. </p> <p>My father was the sole wage earner when I was a kid, and he worked a blue collar job in a factory. He was able to buy a 3 bedroom semi-detached house and provide for the family of four.</p> <p>I&#39;m a software consultant in the financial sector in London, and am stuck in the rental loop.Even on my relatively good income, I don&#39;t see how I&#39;ll be able to get together a deposit in the south east of England. Meanwhile my parents and grandparents that all benefitted from the better climate have remortgaged or sold off to retire in luxury. </p> <p>Because fuck me, right?</p></pre>dingo7055: <pre><p>In Australia it boils down to two words, <a href="https://en.wikipedia.org/wiki/Negative_gearing">&#34;Negative Gearing&#34;.</a></p> <p>And if you read that wiki and think it sounds like a ponzi scheme, that&#39;s because it very nearly is. But it&#39;s 1000% legal, and most of our Political leaders own 2,3, 4, sometimes 7 or 8 real estate properties purely as investments / for tax benefits, along with many many Baby Boomers, so there&#39;s zero political will to do anything about it because &#34;Fuck you millenials&#34;, and apparently the Millenials have an overblown &#34;sense of entitlement&#34;. Horseshit. </p></pre>ingruberti: <pre><p>The real causes of the housing markets are several. Lack of regulations and the banks way of working are the 2 most significant ones. Regulations were progressively relaxed starting from Clinton administration: on the one hand this helped many people have the right to obtain huge loans despite not being previously eligible (Example was in some cases optional or to a maximum of 5%); on the other the people were looking for homes they couldn&#39;t really afford. furthermore, in case they couldn&#39;t pay the mortage and defaulted, people have the impression of a ever-growing market and that, therefore, they could easily resold the house, thus breaking-even in the worst case scenario. This of course was not true and, if you think about the number of people simultaneously having this approach, you can guess why the housing market became a bubble. About banks, the issue is that they fueled this momentum by creating financial derivates to minimize their risks. shortly put, joe gets a loan for 200K from a bank. the bank split this amount into parts of 10k which go into different derivates, which are then offered to investors. their ideas was to minimize the risks but, when the defaults started increasing in number -starting the crisis-, banks with this slicing/cutting/atomizing/reallocating weren&#39;t de factor unable to tell good products from bad ones. The general disbelief on banks financial products skyrocketed; so when AIG and others weren&#39;t able to cover defaults, they themselves defaulted, enabling the vicious circle of nobody trusting anybody. So i don&#39;t think boomers are any wronger than others. Wrong was the <em>boomers-like</em>-idea that everybody with a job (whatever the salary) was entitled to an hollywood-like villa.</p></pre>lauded: <pre><p>The fact is, at least in the U.S., it was boomers plus the Reagan-era invention of 401k/403b retirement accounts that ruined all the markets. When those instruments were created, and boomers were enjoying the financial success that post-war programs had created, they dumped scads of cash into the stock market, creating &#34;growth&#34; in the stock markets that not only saw people invest in stocks more for share price increase over dividends but also saw people begin to expect share price growth of 15% or more year over year. </p> <p>The former meant that companies were no longer managed for long-term profitability, which is what drives dividends, but for short-term growth that would lead to regular stock price increases. This began the rise in executive salaries, many of which were tied to stock increases with little regard to a company&#39;s overall health. Combine this with the invention, at first at Harvard but rapidly spreading across the U.S., of MBA programs and you have the development of professional managers who only care about the bottom line and its impact on stock prices and not of managers who came up through the ranks and firmly understood the business. (I was in management development at the time and I saw the conflict first-hand in one company.)</p> <p>This loop of money chasing money and companies being managed to aid that chase led to some pretty amazing expansion -- anyone remember Wired&#39;s claim that it was the beginning of an endless boom? That also helped conservatives sell, and consume, the idea that private markets were always better, more efficient.</p> <p>Only anyone awake knew that as soon as the boomers started retiring and wanting their money out of the markets that things would begin to shrivel, like a particular organ post-coitus. </p> <p>And here we are today.</p></pre>BubbaPickles: <pre><p>I hate to say it, but this seems like a more of a whining session than an &#39;explanation&#39;. &#39;Boomers&#39; ruined the housing market? &#39;Boomers&#39; ruined the job market? &#39;Boomers&#39; ruined the healthcare programs? &#39;Boomers&#39; bought up all the houses and jacked the rents up so that &#39;no one&#39; can afford them? WTF?</p> <p>How many millions of &#39;boomers&#39; are there? I don&#39;t know the exact number but this discussion seems to imply that all of them (including myself) are selfish, money-grubbing, self-centered and uncaring. Talk about painting with a broad brush. This is completely wrong and frankly very silly.</p> <p>Yes, there are &#39;boomers&#39; in government, banking, financial markets, real estate, etc. but what the hell else are people supposed to do? Should all &#39;boomers&#39; have been social workers whose only goal in life is to make the world a better place? Get serious. People live their lives according to the circumstances they are born into, not the other way around.</p> <p>The &#39;boomers&#39; who are &#39;to blame&#39; (since that seems to be what this discussion is really aiming for) for the housing &#39;crisis&#39; are the government officials, bankers, and market makers who repealed Glass-Steagal, devised the formula for turning sub-prime mortgages into investment vehicles, and lowered the bar for mortgage borrowing to the point where anyone who wasn&#39;t buying a house felt like an idiot. Not every &#39;Boomer&#39; was part of that. As the first part of this discussion says &#39;It would be wrong (actually it IS WRONG) to generalize a whole generation&#39; based on the actions of a small group. </p></pre>RickyTheRaccoon: <pre><p>There are a lot of very good and informative posts here already, honestly. I just wanted to add one factor that also played into it all, in the US. Sometime during the... I think Reagan administration, the formula used to calculate minimum wage, poverty, and cost of living was changed to discount the cost of housing. So whereas before minimum wage and all that was calculated in such a way as to include owning a home, which in turn is why minimum wage was considered a truly living wage, during the era of the boomers, the more modern generations don&#39;t have that rather important factor being calculated into things any more. </p></pre>MuhLaws: <pre><p>The United States at least, boomers are the first generation to enact all sorts of grossly short-sighted &#39;me first&#39; economic policies into law without any regard for the well being of the generation that came after. They created an economic hellscape that all future generations will have to spend their time unraveling. The free market speculative nature of the housing stock- rather than viewing it as basic critical infrastructure- has a huge part of this. Boomers let this happen. </p> <p>My theory? Their parents suffered through a depression (very brutal) and World War II. They worked so hard to create a stable and prosperous society- and utterly succeeded- that what came next was an entire generation of self-centered brats who, when it was their time to run the country, had no sense of attachment to the idea that the world didn&#39;t revolve around them so they started enacting policies that would enrich them at the expense of the next generation in line. </p> <p>It&#39;s not a single-axis problem, though. Contributing to it is insane over-regulation. The price of certain commodities critical to homebuilding- and the prices of land- are going up-up-up (again, because of boomer economic policies, currency, debt, etc) but the cost of regulation associated with building a house is really burdensome and a lot of it is totally artificial. </p></pre>snakeoutfood: <pre><p>A lot of people talking about deregulation as the root of all evils, but also keep in mind that women entering the workforce contributed to raising home prices because two-income bids quickly became the norm. Now, double income families are required. That&#39;s not an attack on female equality, but a result that can&#39;t be ignored. Read Elizabeth Warren&#39;s book on the subject in &#34;The Two Income Trap&#34;. Also, lenders are required by law (Community Reinvestment Act) to invest in poor communities that would otherwise not be considered sound investments. </p> <p>And another observation is that there is affordable housing all over our country, that young people simply don&#39;t want to move to. Millenials want &#34;affordable&#34; housing, but we also want to live in cities. The affordable housing is there, we just don&#39;t want to take advantage of it. We want to have our cake and eat it to.</p> <p>TLDR: I&#39;m trying to speak from a centrist view here and point out that there are myriad factors not being discussed in this thread.</p></pre>eldude1277: <pre><p>I disagree, creative mortgage types (interest only, jumbo, 7-10 arms, etc) paired with relaxed financial requirements, and the gov risk ratio is what caused the housing boom and then bust. Basically everyone can buy a house, the banks risk nothin, the Feds are stuck with the bailout. </p> <p>It was a good intention to increase home ownership bc it promotes stability and can provide family wealth. But unfortunately when everyone is getting rich, it&#39;s hard for anyone to raise an alarm.</p></pre>RepublicanScum: <pre><p>Baby Boomers are typically considered 60+ (Maybe 70 at this point?) in the US. My parents are baby boomers.</p> <p>They ruined the environment.</p> <p>One argument is that they (and people slightly younger) devised a system to package and sell high-risk mortgages that eventually lost value when foreclosure rates got too high. I remember everyone was a mortgage broker around that time and they were writing mortgages for everyone under terrible terms. When we bought our first home some random mortgage broker offered us 90% LTV at 12% for 30 years. We declined and bought a cheaper house under traditional terms.</p> <p>An argument can be made that the US housing market crashed because Gen X (and slightly older individuals) 30-40 year olds borrowed more money than they could afford under poor terms they didn&#39;t understand and tanked the market. </p> <p>It&#39;s the classic question of who is to blame for obesity: McDonalds for selling unhealthy food* or the people who eat it....</p> <p>*The caveat being that people could have actually read their mortgage docs and understand them yet they chose not to. No one really knows what&#39;s in McDonalds food.</p></pre>JohnRenzi1998: <pre><p>Before any of you &#34;economists&#34; respond, I was in the middle of this entire mess and I know from I.T. largest U.S. bank home loan servicing what I&#39;m talking about.</p> <p>Baby Boomers didn&#39;t cause the ruin of the U.S. housing market in 2008, also known as the Sub-Prime Loan Crisis, and Lehman Shock. BLAME Office Automation. Blame Generation X me.</p> <p>In 2008, every business was laying off middle managers and using their Human Resource staff with new middle management software to do the middle manager&#39;s jobs.</p> <p>These middle managers were paying their mortgages and were doing fine until they got laid off and had to go to work for their competition or a completely different field of work at entry level wages of $12.50 per hour. They had no choice but to walk away from their homes with their families and get apartments.</p> <p>Bank mortgage loan officers were not giving customers loans who might not have been able to pay those loans back. They were good customers and not flaky. The customers were just all being laid off.</p> <p>Nor was President George Bush or Merrill Lynch&#39;s John Thain to blame other than all the unethical things they did while middle managers were being laid off and the middle class was dying. </p> <p>Today, Canada with its lower population, has a larger middle class than the U.S.</p> <p>The story doesn&#39;t end there. In 2005, I had already been automating software, network and systems engineering jobs for Internet Service Providers. Meanwhile, corporations were using seasonal temporary staff and still are. Most of the places I consulted only had permanent executive and human resource staff.</p> <p>I was able to earn fairly good money automating workplaces and teaching executives how to automate their offices. But that all ended when they got up to speed. Now even I.T. is outsourced. Teams of 50 people have been reduced to just 5 here in Tokyo where I am. We&#39;re all Data Scientists and Engineers doing the work that would have taken 100s of people in the early 2000s to do.</p> <p>Software A.I. today can read many languages and understand synonymous phrases. It can extract meaningful data and generate reports instantly. Office workers who type, will be out of a job in just about a year.</p></pre>JohnnyJJ1: <pre><p>I (M, 35) was speaking with my boss (M, 71) recently about housing. He put it this was; when he purchased his first house, home prices were much lower in relation to income. Which means it is much more difficult for the current generation to purchase any home. However, the expectations of the current generation is much higher. His first home was a modest property 35-40 minutes away from the ideal suburban locations for a NYC commute. Every day he would drive well over an hour each day for work. He claims that the current generation does not want to make similar concessions. They want a nice home in the ideal location and are frustrated that this is impossible. </p> <p>As far as why the nice home in the ideal locations are so expensive, it doesn&#39;t go much further than supply and demand. In the most desirable areas all of the open land was gobbled up years ago. There is no more housing. There is a limited number of properties. Now, factor in that people are living longer. Factor in that for many people who have their homes paid off and kids out of the schools there is no easy way to sell and lower their overhead and stay in the same location. (for example: why sell a $650k home to move into a $550 condo) There is no incentive to move. The only incentive to make a lot of money. So what you end up with is all of these older singles or couples in 3 &amp; 4 bedroom homes in the towns everyone wants to get into. And you can get into easy mortgages and all that stuff but at the end of the day it just comes down to scarce housing in the best areas. </p></pre>pneuma8828: <pre><p>In the US, it all started with the Bush tax cut. George W. Bush, when he took office in 2000 after 8 years of Bill Clinton, slashed taxes in one of the largest tax cuts for the wealthy in history. Suddenly, there is this giant pool of money that rich people have, looking for investments. So it enters the stock market.</p> <p>Less than a year later, September 11th happened. The stock market crashes. When the stock market turns down, investors look for debt investments (bonds), because the returns on them are predictable. However, interest rates on bonds were effectively zero (negative even) because the Fed dropped the rates so low in attempt to stimulate the economy. Moreover, because of that tax cut, now there is much more demand than the bond market can satisfy. Investors, watching their money evaporate from the markets by the minute, turn to a new source of bonds - mortgage bonds. These are debt instruments banks created by taking a bunch of mortgages, sticking them in a pool, and selling shares of that debt. Now traditionally mortgage bonds were rock solid investments - the default rate on mortgages was quite low and predictable. However, because of that giant pool of money from the tax cut, demand for mortgage bonds skyrockets. This means that banks are screaming for more mortgages so they can sell more bonds. Mortgage brokers, knowing that the bank is going to buy the mortgage with no questions asked, begin giving mortgages to anyone with a pulse. I personally know a guy who had never made more than minimum wage who bought a house during that period, no down payment. He of course defaulted.</p> <p>The rest of the story you know. Eventually the house of cards came tumbling down, and the economy crashed. As to the question as to why the Boomers get blamed...well it wasn&#39;t Millenials running things at the time.</p> <p>For more information:</p> <p><a href="https://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money" rel="nofollow">https://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money</a></p></pre>GrandmaChicago: <pre><p>In addition to things already said regarding economics:</p> <p>&#34;Boomers&#34; were raised by parents who had lived through the Great Depression. They knew how to pinch a penny so hard that Abe Lincoln cried.</p> <p>&#34;Boomers&#34; didn&#39;t have to buy a new phone every few months - that old bakelite rotary model worked just fine.</p> <p>&#34;Boomers&#34; didn&#39;t have to buy an entire new wardrobe made by slaves in Asia every few months. Heck, most of them wore what their moms made from Simplicity patterns from the newspaper.</p> <p>&#34;Boomers&#34; learned how to save, how to comparison shop, how to say &#34;no&#34; to commercial enticement, and put aside for their future.</p></pre>ConnieLingus24: <pre><p>For the U.S., I think it&#39;s a combination of a few things. Some are addressed in the top comments (Reagan, Boomers climbing the economic ladder and then kicking it out for others, etc.) but on top of that, you also have to look at the by product of WWII: the U.S. was THE dominant industrial power after WWII because we did not get as hobbled by it as some of the countries that were in the middle of that action (England, Japan, Germany, etc). On top of the New Deal policies, we were the only two legged participant amongst many one legged participants in an ass kicking contest. Salaries in some ways were artificially high since we didn&#39;t have the foreign competition. Further, there was a strong labor movement that had real bargaining power when it came to benefits and salaries. So that all came pretty easy compared to your bombed out foreign counterparts. But that changed by the 70s, 80s, and 90s. Aside from dismantling what the Greatest Generation put in, post war economies for our foreign counterparts recovered. And from there, globalization increased and trade expanded. Manufacturing went to countries where the workers had a lower standard of living and then the standard of living here became based on assets......no matter what the debt was compared to those assets. Inefficient suburban sprawl with McMansions that shouldn&#39;t have been bought or built in the first place.......Student loan debt for a degree you really should have worked at part time......and so on. </p> <p>TL;DR we coasted for way too long and took American exceptionalism a bit too literally. There are many things great about this country. I&#39;m not against entrepreneurship, but we became far too much of an economy based on assets versus net worth. </p></pre>Harry-le-Roy: <pre><p>There&#39;s a lot of talk here about a lot of legitimate economic factors related to the housing market and fiscal policy. However the economics of post-secondary education and training is also a major factor.</p> <p>Since the 1970s (accelerating more recently), there&#39;s been a shift of manufacturing jobs away from developed countries. Along with this, came a drop in the relative price of many consumer goods. Cheap goods and high local wages kill repair and maintenance jobs.</p> <p>As developed country manufacturing sought to control it&#39;s own labor costs, companies did what they generally do: they cut training programs. In doing this, blue collar work eliminated a valuable benefit, and made it a cost that works must incur themselves. This is part of what led to the 2-year college boom in the US.</p> <p>Along with that came a shift toward knowledge workers. These jobs generally require a 4-year degree at a minimum. College became the ticket to the middle class, and prices escalated to reflect both that need, and the availability of resources from the first generation of college graduates sending their own kids to college.</p> <p>The implication for the housing market is that whereas a generation ago, education and training were often either inexpensive, or they were part of paid work, people entering the workforce now do so with significant education debt. Instead of spending the first decade or so of earnings saving for a down payment and investing, they&#39;re spending a lot of money servicing debt. For the last several years they&#39;ve been graduating into an economy with limited demand for their education, yielding high levels of under-employment and unemployment. </p></pre>endelikt: <pre><p>Here&#39;s a repost of an excellent comment made by <a href="/u/enigmasaurus-" rel="nofollow">u/enigmasaurus-</a> in relation to unemployment rates and the role boomers play in housing prices. It&#39;s an Australian perspective, but can easily be applied to most western democracies and the issues they face.</p> <p> </p> <p>This is what happens when a generation&#39;s only economic plan is to borrow from the future. Our largest, oldest generation has enjoyed a political majority for decades. And with that majority they have enjoyed an unprecedented boom and a record period of prosperity. They have extended their prosperity and comfort by rigging policy in their sole favour, bolstering home investment and - wherever cutbacks have been required - relentlessly targeting families and youth, lest we engage in the travesty of upsetting anyone&#39;s comfortable retirement. So zealous has been this generation&#39;s avoidance of shouldering absolutely any personal economic pain whatsoever, we have clung to many dangerous policies in spite of decades of warnings (you know how we&#39;ve been hearing about the crash for years? Yeah, we&#39;ve also been doing NOTHING to prevent it for years). We&#39;ve fed the world&#39;s most obvious property bubble, baulking at the very suggestion of allowing house prices to ever fall - even a little. At our last election the suggestion prices might drop 2% was met with such a wave of collective Boomer hysteria we were forced to throw the country under the bus yet again. Won&#39;t somebody please think of the portfolios! And so, we continued building and building our idiotic debt pile. Our elders helpfully explained the problem wasn&#39;t them or their selfish, myopic, harmful policy deck-stacking, oh goodness no. It was young people - buying iphones and lattes and avocados. Apparently the young invented consumerism in this fantasy scenario, and of course reality is not admitted into this delusion. We&#39;ve ignored the fact spending on retail, entertainment and domestic tourism has ground to a halt in younger demographics - which are both spending and earning less than past generations. Lost to debate is the fact that without spending, economies also stall. These inconvenient truths aren&#39;t welcome as long as house prices keep rising. Unfortunately - and this is the issue eclipsing all others, there&#39;s a rather fucking important problem with debt: it is consumption brought forward. Without sufficient consumption, the debt pile our aging population sits on is going to drown us. And where does ongoing consumption come from? Taxpayers with fucking jobs. Taxpayers able to afford a basic home to live in. Taxpayers able to gain a semblance of financial stability. If you want to end the property bubble and return this country to a fair playing field (and if we have any hope of restoring economic stability and surviving an aging population this must happen) here&#39;s what you need to do. Stop playing their fucking game. Stop pretending house prices will remain in a never-ending upward spiral in the absence of wage growth. Stop pretending the horde of investors (primarily Boomers and foreign nationals) snapping up properties aren&#39;t going to hit the wall of reality. Stop engaging in the very fear of missing out that keeps you chained to a bandwagon careering towards a cliff. Sit back, make yourself a smashed avo sandwich, and call bullshit on the bubble. That is your best weapon. (Let&#39;s face it, your only weapon.) This bubble is already on life support. Rates are rising, negative sentiment is rising (the media - which just a year or two ago denied a bubble even existed, has gone crash mad), income growth is at a record low and cities are entering oversupply. Yes prices are still soaring because investors are still buying, but who are they going to sell to? Other investors? And who are they going to sell to? A ponzi scheme cannot survive when only investors are buying, and when the median buyer is priced out. It is mathematically impossible for the sheer volume of investment properties in this country to be continually onsold for profit in a market flooded with supply and in a market where ordinary home buyers can&#39;t get a look in (and with the banks tightening lending, probably couldn&#39;t buy if they wanted to). So keep calm and call bullshit. The trouble with bubbles is there is an inescapable point where everyone realises value is a mirage. A point where people realise tulips are just shitty fucking flowers. A point where our Boomers will realise houses are four walls and not million-dollar ATMs. A point where our Boomers will realise capital gains only happen for as long as our dwindling pool of buyers are both willing and able to pay more. A point where our Boomers will realise that if all owners become investors you have nothing but one giant circle-jerk. A point where our Boomers will realise that due to oversupply, the investors in this country are basically borrowing millions to a play game of musical chairs in a room with more chairs than people. We will also reach a point soon where our underemployed youth, starved of financial security, saddled with the debts and excess of our idiot forefathers, and living on a dying planet, will become the voting majority. That youth will remember. Edit - per a few requests, anyone is welcome to repost. Edit 2 - For context, since this is being visited by a lot of non-Australians now... (Yes, the above is an &#34;emotive rant&#34; and is light on stats, but it was directed towards a specific audience and within a particular context. <a href="/r/australia" rel="nofollow">r/australia</a> has had plenty of bubblesplaining posts, general bubble discussion and commentary in the media recently, as concern over the bubble is increasing. The above post wasn&#39;t designed to offer that, though anyone looking for something with more on the actual bubble is welcome to read my numerous other rants on various aspects of the subject as yes, this post is light on actual information. God I need a new hobby...) Quickly though - according to BIS Shrapnel (now BIS Oxford Economics) based on our current population growth (which is way, way down from its 2009 peak) we need 150,000-165,000 homes annually, and last year alone built a record high of 230,000 (Citi). Emerging oversupply is a serious problem - this helps explain why just recently BIS Oxford Economics published a study showing 40% of apartments in Brisbane have sold at a loss since 2011, as have a shocking 60% of apartments in Melbourne. Australia&#39;s market offers some major (and increasingly politically contentious) investment incentives - negative gearing and capital gains tax concessions, and these in concert have made investment in housing extremely popular, extending a boom into a bubble since at least 2012 (if you include the boom, since the early 2000s). Unfortunately, without capital gains, negative gearing may burst the bubble as people will effectively be holding loss-making assets. Interest-only loans are also a huge problem, comprising up to 50% of investor loans - and as banks have started hiking rates up to twice a month recently, this is worrying. Investors now make up around or over 50% of our purchases into the market and have done so for about 5 years (with numbers rapidly rising since investment policy incentives - primarily used by Boomers - were introduced in 2001). On principals - Sydney is the second most expensive market in the world right now according to Demographia&#39;s median multiple at house prices of 12.2 x median household incomes (which are growing at a record low rate, at less than inflation). Even our cheapest capital city, Perth (6.1), is more expensive than New York (5.7), and almost every other major OECD city. The average median multiple nation-wide puts median house prices at around 6-7x median household incomes (over 10 in Melbourne). This is around 3 times the long-term mean of the median multiple, which on a 100-year average sits between 2-5 in the majority of OECD cities. Outside of a bubble (and there are many other common indicators of a bubble (e.g. price-to-rent ratios, other price-to-income ratios, debt-to-income ratios - there are lots of them, all forming bits of bubble evidence - the median multiple is just the easiest one to understand) it is rare for cities to leave this range, as the range represents demand based on market fundamentals like incomes, rental demand, population growth, inflation etc and not based on investor sentiment (which is incredibly fickle). When bubbles do burst, prices also typically correct to within that range. Some of our major cities have already seen sharp price declines e.g. Perth, Darwin, arguably Brisbane is now dropping too. Sydney&#39;s growth remains ludicrous.</p></pre>shatabee4: <pre><p>&#34;The housing market&#34;</p> <p>Actually, it&#39;s a mortgage market. Even that sounds much too innocuous. Mortgages have morphed from a means to buy a house to an utter scam by banks to suck every last dollar out of the middle class. </p> <p>&#34;Boomers&#34; didn&#39;t ruin the &#34;housing market&#34;. The corruption of banks and their influence on a corrupt Congress ruined the housing market.</p></pre>techauditor: <pre><p>They took advantage of easy loans in the US. People who made 40K would get loans for fen times that. These days no way that would slide. Everyone did it, then people started defaulting on loans like crazy... Demand was through roof, supply wasn&#39;t, prices shot up and now we are here. </p> <p>My grandpa got his first house for about 40k, a nice home worth 700K ish now. He made like 10k a year and grandma made like 4. They could easily lay it off in ten years. </p> <p>To do that now you&#39;d have to make 200k a year or so... For the same home... My Gparents weren&#39;t rich at all, middle class and early 20s. their jobs now (they were both entry level or first few years of career) would pay like 100-110K combined now.. See the 100% disparity? ....</p> <p>Edit: this is also difficult now because the job market for the most part of the last ten years has been far worse. Also getting in to and paying for college was far easier back then. My grandpa went to UCLA and came out debt free working part time... Try that now LOL. </p></pre>Floodlobby: <pre><p>At one time, the American Boomers complained that their parent&#39;s generation locked them out of the housing market. To combat inflation in the late 1970&#39;s and early 1980&#39;s, the Federal Reserve raised interest rates to astronomical levels. At one point, a mortgage would cost 18+%. </p> <p>Personally, I see Generation X (my generation) as a significant consumer driver of the problems Millenials currently face. We had/have a very small appetite for the housing vacated by the Greatest Generation (much of which was cheaply built, post-war, mass produced single family housing) and a significant appetite for luxury housing. We didn&#39;t want our grandparent&#39;s 1,200 square foot house in the suburbs. We wanted master bedroom suites, walk-in pantries, laundry rooms, and room for guests. So that&#39;s what was built for us. We could afford it thanks to an economy that we had a minor role in building and favorable rates and lending practices. </p></pre>oldman_66: <pre><p>Also, environmental rules and NIMBY&#39;s have made development much more expensive. </p> <p>Environmental rule while a great thing, and protect the consumer, require developers to do a lot of work now that they never had to do. So housing prices have to rise. </p> <p>As far as NIMBY&#39;s (Not in my back yard) I have an example I live in a neighborhood that is actively fighting a rental and townhouse development that will contain 20% low income housing. Everyone is worried about the kinds of people living there. As well as extra traffic and potential for those new renters using our neighborhood as a cut through. </p> <p>This development has been in the works over 10 years because of all of the fighting over it. They are just starting some site work now. </p> <p>That extra time is all costing money which gets added to the developers need to charge more. Therefore higher cost of housing. </p></pre>sometimescash: <pre><p>Boomers hold close to 87% of all wealth in this country. Who else was buying and driving up housing market prices creating a bubble? But they are not entirely to blame. The damn government and the left are the blame for sub prime mortgages being so easy to get. So those that could obtain these new garbage loans could do so without providing necessary down payments or even in some cases actual proof of work history or income, because the left thinks it&#39;s too important to put poor people in houses that they can&#39;t afford rather than thinking whether this is actually the right way to go about it. There&#39;s a reason why credit ratings exist, why it&#39;s suppose to be hard to get a home loan, so you actually pay your mortgage like you promised. It&#39;s not some damn game or social experiment, but that&#39;s how it was played in some cases.</p></pre>justSomeGuy345: <pre><p>In America, the boomers reaped the benefits of the New Deal and Great Society while avoiding the hardships of the Depression and WWII. They had affordable university educations, then graduated to good paying jobs and affordable housing. </p> <p>As they got older, the voted to dismantle the New Deal and pass the cost onto subsequent generations. Public schools declined. Universities increasingly relied on tuition payments and corporate financing, rather than taxpayer subsidies. Boomers grew wealthy as their houses increased in value, while subsequent generations had to accept higher housing costs.</p> <p>Two caveats: 1) The Vietnam War was no picnic. 2) African Americans didn&#39;t prosper nearly as much as white baby boomers.</p></pre>jmlinden7: <pre><p>It&#39;s hard to create new real estate due to geography, logistics, or zoning regulations, so this gives existing property owners a huge leg up in the market. Existing property owners tend to be boomers who bought low back in the day.</p></pre>thehared: <pre><p>They didn&#39;t. Relaxing lending regulations for banks made it easier for them to take on sketchy lenders. This was brought to you by democrats and some republicans in the late 90s. It was worsened by some of Bush&#39;s actions. </p></pre>69th: <pre><p>So many people here have such intricate and well thought out answers, it&#39;s intimidating to say the least.</p> <p>Essentially, the baby boomers in the US built cheap homes in (at the time) inexpensive areas, and jacked up the zoning process and prices such that my generation can&#39;t do jack shit without jumping through a million hoops. At this point, if I were going to afford a home in New England where I live now, I would need three full time, $16/hr jobs for the next year to even be approved for a mortgage, let alone afford one. It&#39;s daunting and depressing to know that I won&#39;t own a home in the foreseeable future.</p> <p>But hey the memes are better, right?</p></pre>BlisterBox: <pre><p>On a related issue, a couple of folks have commented in a denigrating way about how taking care of baby boomers (like me) is the only true growth area in the US economy. Why is this considered a bad thing? That wealth that we accumulated that you all are so upset about is largely being used to pay millennials to take care of our aging parents (and, in a few years, ourselves). It will eventually be one of the greatest transfers of wealth in history.</p> <p>I know this because I&#39;m getting ready to sell my 85-yo mother&#39;s $300,000 home so I can pay for her Alzheimer&#39;s care. </p></pre>NobleHalcyon: <pre><p>There&#39;s a variety of reasons, but primarily it boils down to this: people purchasing homes during the 80&#39;s and 90&#39;s were overwhelmingly Boomers and Gen-X&#39;ers. Boomers had a much larger role in the contributing industries and thus put many of the policies and procedures in place that allowed this to happen. </p> <p>Let me be clear: there&#39;s no one specific group of people in the wrong here. Nobody is prescient, and during the 80&#39;s a lot of people were wrong about the long-term impacts of economic policy. </p></pre>skinnydudej: <pre><p>Slightly off topic but I&#39;d like to add something and ask if anyone has any ideas about what will happen.<br/> Currently in the U.S. there&#39;s a lot of houses being built, optimism is pretty high for financials keeping the stock market high. I&#39;m beginning to see and hear about these new houses sitting on the market recently. They aren&#39;t being sold. In order for builders to make money those houses need to sell quickly. Since they aren&#39;t moving fast enough builders are buying them and renting them out so they continue to have income. Small banks are calling in loans before they are due because they are wanting to pull back from the construction loan business. Builders are starting to fail and go out of business because they aren&#39;t adjusting to the market being slow. There&#39;s a glut of brand new houses beginning to build up.</p> <p>It&#39;s my opinion that there&#39;s a housing bubble that will burst relatively soon.<br/> The reason banks are backing off is because unlike the last housing crisis they aren&#39;t able to hedge their bets like they could previously. Last time there was government incentive to give out loans, even bad ones, the trick was that they could hedge these bad loans against government security, meaning no matter how many bad loans they made they had nothing to worry about because bad loans were still going to get them paid one way or the other.</p> <p>This is only my little view of the world but I think we have a problem that&#39;s going to show up, a market correction is needed and the longer we sit on it the worse it will be. I&#39;d welcome anyone telling me that I&#39;m wrong and pointing out why, this is all speculation that I&#39;m seeing in my corner of the world so hopefully it&#39;s not the same everywhere. (Southern area of the U.S.) </p> <p>The previous failure was due to government incentives meeting greed. With the repeal of the last vestiges of Glass-Steagall the barrier was removed that prevented banks from hedging against bad loans with securities. They simply couldn&#39;t fail, if they gave out a high risk loan it didn&#39;t matter because they could bet either way, no matter what happened they were going to get paid so why not make all these crap loans?? </p> <p>Or: Government says &#34;Houses for everybody! Whoo!&#34; Banks said: &#34;Hey, that doesn&#39;t make any sense, you can&#39;t just give everybody a house, lots of these people can&#39;t pay. We&#39;re going to go bankrupt!&#34;</p> <p>Gov: &#34;No sweat, we&#39;re going to have your back fam, we&#39;ll change the rules so you can have some &#39;insurance&#39; for that, you can&#39;t lose now go get some people in some houses!&#34; </p> <p>Banks: &#34;We&#39;re gonna be rich!!!!! Everybody get out there and make some loans! No, it doesn&#39;t matter if the applicants make $30k a year and can&#39;t pay back a loan on a $200k house, we&#39;re gonna make phat lewtz either way! Whoo!!&#34;</p> <p>CRASH</p> <p>Gov: &#34;WTF?&#34; Banks: &#34;You told us it was all good! You said we could! Waaa! Bail us out or I&#39;m gonna tell mom (public) what you did!&#34; Gov: &#34;Seriously?&#34; &#34;Fine, we&#39;ll cover it and make the taxpayer bail you out. We won&#39;t be doing that anymore, you guys got crazy.&#34; Banks: &#34;Thanks for the free cash taxpayers!&#34; &#34;We&#39;ll think about doing what you said but now we know we can do anything we want.&#34; Gov: &#34;Here&#39;s the new rules, you gotta follow all these rules and do your chores!&#34; Banks to other banks: &#34;We totally screwed them over and they paid for it! There&#39;s fewer of us now, those new regulations are going to kill the medium and small banks because all those regs take a lot of work, let&#39;s just bide our time and us big guys can take all of it over!&#34;</p></pre>SmatterShoes: <pre><p>Here in socal..my parents bought a house back in 1992 for 210k. They just paid it off a few years ago and now it&#39;s worth nearly 700k...it&#39;s absurd. Of course I&#39;m happy I will get it when my mom passes on...but then I will sell it and go to a place like Texas ..get twice the property and pay around 200k..pay it off so my kids will one day have something and put the rest In investments and my daughters college fund...</p></pre>syriquez: <pre><p>In the US, Baby Boomers grew up during a period of time where their parents, the Greatest Generation, invested into the social contract. That is, they recognized and accepted the communal benefits of investing into society, even if it didn&#39;t translate into immediate direct benefits to themselves. Pay in while you can right now while the country is at its strongest so that your children don&#39;t have to starve tomorrow when the wealth slows, dips, or drops entirely.</p> <p>Those Baby Boomers would grow up without realizing WHY they and their parents had such a good time because they were not the ones investing into the social contract. Their parents invested and 20 years later when the Boomers were moving out on their own, the investment paid out and the Boomers were able to do things like pay for a home, a car, and a college education all on an entry level income. The social contract had been fulfilled and they benefited from it.</p> <p>However, the Boomers didn&#39;t see the social contract as a benefit to them despite what it DID do for them. They just saw it as an unnecessary drain on their own resources. The social contract had helped them pay off their mortgages and debts and now they were flush with cash that was mysteriously going to something THEY didn&#39;t personally authorize. So they quit paying into that social contract going into the 80s. And then 20 years later again, the social contract&#39;s investment from the Greatest Generation had fully dried up after continually being drawn from by the Boomers despite their refusal to pay into it. And as things went along, we have the Recession hit because all of these Boomers had been deregulating and continually pulling out the supports propping them up. Their investments into real estate, enabled by the social contract they had reduced to a dried husk, finally gave out and crashed the market.</p> <p>When the bubble popped, the Boomers were suddenly left without a safety net for their years of bad behavior and lack of investing into the social contract. So their solution was to take money from the future to pay off their debts now and delay the social contract&#39;s void eating them by another 10 years. As a result, the bubble has been getting inflated yet again except now there&#39;s even less foundation to support it when it blows.</p> <p>As a bonus, foreign investment from wealthy individuals less confident in their own country (AKA China) is putting tape on the weak parts of the bubble so that it can inflate bigger before bursting.</p> <hr/> <p>TL;DR: The Boomers&#39; parents paid for the Boomers to have a future. The Boomers got their future and didn&#39;t want to pay for the next generation&#39;s future. Luckily, their parents had paid enough to support almost two generations, which was what carried us into the 2000s. Near the end of the 2000s however, that investment was expended and the sticks propping everything up had been snatched away. They are now taking money from the current and future generation in order to delay the penalties for their own failure to invest into the social contract. And the combination of stealing from current/future generations and foreign investment interference is preventing the bubble from collapsing naturally and allowing the market to adjust to where it should actually be.</p></pre>DibblerTB: <pre><p>Another dimension to this is when older people complain about millennials having few children, or having them late in late.</p> <p>If you believe that- then go crusading to fix the housing market.</p> <p>Only after the housing market is fixed, should you be allowed to rant on millennials over it.</p></pre>DeveloperChris: <pre><p>Mostly because they don&#39;t know what they are talking about and want to blame someone.</p> <p>Here is a part of the real reason house prices have moved out of the reach of single buyers. That&#39;s an important distinction. Although its different for every country.</p> <p>In the 70&#39;s inflation started to take a grip on the western world, this caused household costs to increase. In turn putting pressure on the household income. At the time a decent if not small house was around 3 to 4 times the households income. Of course annual salaries ranged incredibly as they do now but in the main you attempted to buy a house in that range which generally worked out that repayments where about 30% of households income. </p> <p>Back then most households were single income households.</p> <p>So housewives, because lets be honest that was the majority case. Started to look for part time and full time work to cover the shortfall. </p> <p>This meant household income increased, but it didn&#39;t just increase by the inflation rate, it increased well beyond the inflation rate. by a whole new salary. This meant those households had more cash to splash. Demand started to outstrip supply and whenever that happens prices go up. So houses started going up at a rate that was different to the inflation rate some times outstripping it by a magnitude.</p> <p>This put inflationary pressures on the remaining single income households. It was a case of both work or go under. As an example, In my case that was what my parents had to do.</p> <p>Thus the spiral began.</p> <p>Today house prices are generally in the same region around 3-4 times HOUSEHOLD income, having repayments around 30% of the household income. The difference is most households now have two incomes.</p> <p>So the people who say Boomers ruined the housing market are way off the mark. The difference is now its hard for a single person to own a house but for a household (two incomes) little has changed.</p> <p>EDIT: Experience varies by country and city.</p></pre>telefawx: <pre><p>The common answer you will receive that gets floated around Reddit are mainly Boomers had cheap housing because of mythical social programs that they no longer let millenials have. </p> <p>To this end, I ask a few questions... What social programs that contributed to more affordable housing went away? Why did new social programs that were designed to increase affordable housing fail? Did any social programs designed to increase affordable housing not work as intended or at all? Did any social programs designed to increase affordable housing actually have the opposite effect? </p> <p>If people can answer these questions then usually they are well informed and then I&#39;ll move to a more macro question... How did any of these social programs, and their perceived successes or failures... override, mitigate or reverse natural market forces? Meaning, with population increases happening simultaneously with our inability to build homes as cheapily in any direction as we want to(it&#39;s much more expensive to build a house floating in the middle of an ocean as it is on land), home prices are going to increase. There were less than 150 million in the 1950s and now there are over 300 million. When there were 150 million people(and remember it was a much younger population with a higher percentage of non-home owning children) and wide open highways to make any commute almost negligible, as compared to now, why wouldn&#39;t homes be cheaper? Is it cheaper to build a new home for a new family, an older family to move out and downgrade, or something in between? If the population is growing and you can&#39;t easily and affordably build a new home with comparable size, functionality, commute times, and general overall value... Prices will go up. Why are home prices in San Francisco outrageous? Because Silicon Valley is the tech capital of the world, the possible reward of breaking in to the wealth available is worth dropping everything just to be in the action... Is worth spending the majority of your income on a tiny box. It&#39;s simple supply and demand. San Francisco is a peninsula that&#39;s what? 7 miles wide? It&#39;s surrounded by water on three sides. Limited supply. Increasing demand. Equilibrium prices rise. The reason San Francisco&#39;s home prices were cheaper for baby boomers compared to now is not that there were more social programs in San Francisco in the 1950s compared to now. That&#39;s just a hilarious way to look at things.</p> <p>The truth, again from the angle of this generational discussion, is that no one &#34;ruined&#34; the housing market. From WW2 to the late 90s, housing prices were relatively stable and modestly increased. Not because of social programs keeping prices down or some ridiculous fairy tale, but because with wide open spaces and reasonable growth, that&#39;s what happens. Home prices are more expensive now not because of a reduction of social programs, but because they should be. Now. A more nuanced discussion is the housing crisis, where home prices skyrocketed well beyond what supply and demand would dictate. On a big picture level, this is simply an abuse of risk and reward. Where sub-prime mortgages represented very risky loans, there was an associated reward. Through the abuse of institutions manipulating the perceived risk, they were able to drive up the reward, ie encourage home ownership through government programs for those that could not afford it. Some will tell you this is the baby boomers with some evil plot. You&#39;ll hear some sob story from Californians about how they had a Republican in power one time for a brief and irrelevant moment and he or she wrote some bill and it completely undermined all the good hard work progressive policies did for 50 years... and that created the housing crisis. That these evil businessmen created this unavoidable global melt down. I guess. But take a moment and Google, &#34;how Texas avoided the great recession&#34; or &#34;how Texas avoided the real estate crisis&#34;. Texas, which would be the 10th largest country in the world if it was its own country, that resides in the same country as California, with the same federal oversight and the same lending institutions, with the very same baby boomers... How it magically avoided the real estate crisis. If you read some left wing sources that want to push some narrative about how Republicans ruined the country, it&#39;s still a great enigma. How Texas, with no state income tax and free market ideologies that tries to eliminate social programs for affordable housing at all costs... How that economy completely avoided the housing crisis and California didn&#39;t. I still don&#39;t think any left wing source has ever been able to explain it with how some incredible mental gymnastics. Where as anyone with half a brain will tell you why Texas avoided the housing crisis. It&#39;s flat, cheap to build a mile down the road, and they didn&#39;t use the government to put people in homes they couldn&#39;t afford. This is all it took. </p></pre>Timinime: <pre><p>In Australia: </p> <p>1) Tax incentives - you can lower the amount of tax you pay, by buying a house as an investment, and deducting the cost of the mortgage / interest and depreciation. So a first home buyer has to pay more than an investor to own a home. </p> <p>2) Foreign Buyers - using China as the prime example, there are concerns that the Chinese government can take a families inheritance, wealth etc. without recourse. So many Chinese nationals try to get their money out of the country, and what better place to put it than real estate (harder to liquidate / track). When Canada / Vancouver put restrictions in place, a lot of that money went to Sydney &amp; Melbourne. Now that Australia has put restrictions in place, that money is going to Auckland (my Mum sold her run down house in a very blue collar / average suburb for $1m to a foreign investor. It sat vacant for 5 months in a supposed rental shortage). *Also - investment visas; some countries allow foreigners to migrate if they invest, say, $1m into a local business. The easiest &#39;business&#39; for foreigners was often to just buy a house or two, and get fast tracked to permanent residency / citizenship. </p> <p>3) Self Managed Super Funds - Australia changes superannuation laws to allow people to manage their own compulsory super accounts. This resulted in a large number of baby-boomers to sell down stocks in their super funds, and use that money to buy investment properties. </p> <p>4) Bank profits - say you buy a house for $200k with $40k equity (80% loan to value ratio - $160k loan). Your house goes up in value and it&#39;s now worth $600k. You still owe the bank $180k, but you now have $440k in equity and an LVR of 30%. So the bank rings you, and lets you know you can use that extra equity as a deposit to buy another house as an investment. And you can lower the tax you pay to the government - woo hoo! The bank allows you to borrow a maximum 80% LVR, which means that $440k gives you $2.2 million dollars to borrow &amp; spend (so long as the rent and your income can cover the interest) and you buy another 3 properties - so you have a tidy little portfolio of 4 houses. As house prices keep rising, you keep purchasing more or you care less and less about paying the property off (just pay off the interest), and one day you&#39;ll simply sell the property and take a huge cash windfall. Meanwhile, younger folk will struggle to save for a deposit as house price increases rise quicker than they can save for a deposit. </p></pre>cjgil2: <pre><p>The housing market is ruined because 20% of my after tax income goes to paying student loan interest. </p></pre>jm51: <pre><p>Do we need a mortgage because houses are expensive or are houses expensive <em>because</em> we can get a mortgage?</p> <p>It used to be that blue collar got paid weekly in cash, white collar got paid monthly into the bank. So most homeowners were white collar because lenders didn&#39;t trust blue collar to repay. </p> <p>Maximum mortgage loan was set around 3 to 3.5 times the husbands income. This limited house prices. </p> <p>Time passes and both incomes are taken into account for mortgage lending. This raises house prices (and rents) as a two income couple can outbid the couples where only the husband works. </p> <p>Then we get to the stage in a long business cycle where Bubbles &#39;R Us. South Sea Bubble, Tulip Mania, the Dot Com Bubble. We likes our bubbles. Not to worry, it&#39;s different this time. btw, there was a land boom in Florida that collapsed in 1925. It took until about 1980 for land prices there to reach their previous peak.</p> <p>Some suits figured out a way to sell very risky debt as safe debt. (Subprime.) That meant that the more debt they could sell, the better. Ability to repay didn&#39;t matter, the suits would be well gone by the time the loan defaults happened.</p> <p>A bubble is an ad hoc Ponzi scheme that relies on fools finding a greater fool. Everybody (seemingly) wins except the last and greatest fool that is now owing much much more than what their investment is worth once the bubble bursts.</p> <p>Boomer blame:</p> <p>The boomers were of an age where they were considered a decent credit risk when the housing bubble started. Many already had home equity and that could be used as collateral to leverage up and buy more properties which could be rented out. Plenty of tenants available because young couples couldn&#39;t match the offers made by boomers.</p> <p>The boomers found greater fools, the greater fools found even greater fools and now we have the latest and greatest fools who still think that they are &#39;oh so clever&#39; because &#39;property only ever goes up&#39; and the gov is still managing to stop a complete bursting of the bubble. </p> <p>Ironically, the people blaming the boomers are currently priced out of home ownership and are renting. Many will be able to afford a home once the bubble bursts as they won&#39;t be saddled with a huge mortgage debt.</p></pre>comsr: <pre><p>In NZ: </p> <p>Boomers Got extremely lenient loans (which played a part in the financial crisis) from the bank to buy excessive housing, causing a shortage for the next generation who they rent their property to.</p> <p>Why doesn&#39;t somebody just build more houses? Because boomers have voting power over millennials and vote for polices to increase housing demand and thus the rent they can charge, I.e. student loans, high immigration and accommodation supplements as apposed to free education, low immigration and state sponsored housing/commie-blocks. </p></pre>tcoop6231: <pre><p>It&#39;s mainly the result of people not understanding the relationship between house prices and interest rates. </p> <p>In 1980, mortgage rates were 18-20%. Now they are only 4%. </p> <p>You can service a lot more debt at 4% than 20%. That means consumers can afford to pay more for houses. </p></pre>lvyouzhe: <pre><p>Here is a relevant article from NYTimes magazine:</p> <p><a href="https://www.nytimes.com/2017/05/09/magazine/how-homeownership-became-the-engine-of-american-inequality.html?_r=0" rel="nofollow">How Homeownership Became the Engine of American Inequality</a> by Matthew Desmond May 9 2017 (soft paywall)</p></pre>Sub7: <pre><p>Biggest issue I see today from young people is that they expect to buy the current place that their parents are living in as a first home. They complain because a 20-25% deposit on that family home is beyond their means. </p> <p>20 years ago I bought my first place with a 5% deposit. It was a tiny two bed place with kitchen, living room and bathroom (five small rooms). That was a fucking stretch and we had zero disposable income, but it was the right thing to do. </p> <p>You just need to be realistic. Start at the bottom, take a risk, borrow as much as you can as your income is only going to increase. Start early and work for it. </p> <p>I have a five bed place in a very nice part of town and it&#39;s almost paid off now. I&#39;ve been given nothing by anyone and worked damn hard for what I have. I get the impression people simply don&#39;t have that work ethic today. </p></pre>MisterSpeedy: <pre><p>In Canada, the biggest cities are totally unaffordable now, even with increasing wages. It&#39;s not unusual in Toronto or Vancouver to see new co do towers or housing developments open up with prices touted as STARTING at $1,000,000. It&#39;s not that we&#39;re short on space, it&#39;s that new developments are built with an eye to sell to foreign real estate investors who buy up loads of properties and flip them for even more than they paid for them, even before they&#39;re finished being built. The government has so far refused to regulate this. </p> <p>Canada didn&#39;t get hit as hard by the real estate crash of 2008 as, say, the US did, but it still took a toll. The major issue is that the last Conservative government did away with the mandatory retirement age, so now the job market is awful because it&#39;s overcrowded with senior citizens who just won&#39;t retire. So I guess here they didn&#39;t screw up the housing market as much as they totally boned the employment market. This is preventing young people from making enough money to be able to actually afford a home. </p> <p>Many millennials are now in their 30s and home ownership is still kind of a pipe dream for many. Even in Ottawa, where I live, prices are rising rapidly and if you want something affordable, you need to be prepared to live way, way out of the city. Seeing as the vast majority of professionals here work in the downtown core (it&#39;s a government town, after all) the commute is becoming an issue. It&#39;s not Toronto levels of bad, but it has the potential to get there. </p></pre>: <pre><p>[removed]</p></pre>quinlivant: <pre><p>Yeah I know the possibilities but it&#39;s just depressing the thought of having to pay £800k for a house that our parents would have paid probably £120k for </p></pre>MinuteMinutiae: <pre><p>If you actually want to learn about the housing market failure and the subsequent financial crisis of 2007, you need to read John Allison&#39;s <a href="https://www.amazon.com/Financial-Crisis-Free-Market-Cure/dp/0071806776" rel="nofollow">Financial Crisis</a>. </p> <p>In short, the various puzzle pieces that make up this picture are: </p> <ul> <li><p>The union demanded changes to the way that S&amp;P and Moody charged for their rating services created massive conflicts of interest and destroyed the reliability of their ratings. This happened in the 1970&#39;s - so the boomers would be largely to blame. </p></li> <li><p>The changes to the US accounting system governed by the SEC created a completely fictitious accounting system that destroyed real data (signals). Accountants must not be liberal or conservative; they must be fact-finders. </p></li> <li><p>The Johnson and <a href="http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html" rel="nofollow">Clinton era</a> laws, policy, and bully-pulpit urges towards affordable housing pushed Freddie Mac and Fannie Mae to get their balance sheets up over 50% risky mortgages. </p></li> <li><p><a href="https://en.wikipedia.org/wiki/Yield_curve#Inverted_yield_curve" rel="nofollow">Bernanke inverting the yield curve</a> while the banking industry was unstable and was betting on long-term yields tipped the scale. </p></li> <li><p>Then after banks were almost suffocating because of the shortage of capital, the Gov&#39;t decided to save Washington Mutual&#39;s uninsured depositors at the cost of WaMu&#39;s bond holders. At this point, the potential buyers of bonds were afraid that the US Government would refuse to obey the law again and would refuse to pay bond-holders elsewhere. </p></li> </ul> <p>This caused the bond market to completely dry up. Other banks could not issue bonds to raise capital and thus the dominoes fell. The lack of liquidity led Bernanke to Congress for a bailout. </p> <hr/> <p>The whole set up to the 2007 collapses were a long series of laws and precedents (and laws that were broken) from the 1970&#39;s through the Clinton era. The government has been almost completely run by &#34;Boomers&#34; and with the Boomers&#39; interests in mind. </p></pre>tetsuoandkaneda: <pre><p>Reading so many comments here make me feel a bit better that I prefer to rent, don&#39;t want to own a home, and invest in other markets and assets. </p></pre>Ruby_Radiant: <pre><p>Basically, because they don&#39;t understand how the housing market was ruined. The housing market collapsed (US-focused) because banks and some insurance companies expanded their dealing with lower credit-quality consumers. Then, they didn&#39;t do their due diligence with the packaged securities that relied on the cash flows of those dealing. They saw the investment returns and just assumed the credit agencies were judging the securities correctly. We deserve more self-regulation from the banks that at the same time demand government to leave them alone.</p> <p>Can you blame the people who were told they could afford a home but didn&#39;t know exactly how? I certainly never expect that much from the average American. They put trust in financial institutions every day with their largest assets and planning. But, then again, the boomers supported the political establishment that put corporations and deregulation ahead of the people, so they have no one else to blame for the lack of protection they had in the crisis.</p></pre>Gurthee: <pre><p>Because &#34;people&#34; are mostly ignorant and are just looking to blame anyone else for their own failures and station in life.</p></pre>tacoafficionado: <pre><p>Another issue I think exacerbates the problem ( in the US atleast) is the unwillingness of so many people to move. The US is a huge country. There are some parts of it that are exceedingly expensive the majority of it is reasonable if not cheap. If people truly want to be a homeowner and are willing to move there is no reason why they could not but they must make some concessions. I am not talking out of my ass either since I actually moved half-way across the country because I realized that for the down payment of a home in California i&#39;d be able to purchase a home outright in the majority of the country. </p></pre>rockytimber: <pre><p>Effects on wages have been global pressures, effects on local resources have been power politics to assure a planned agenda. Zoning and building codes is local, and its a plan by the wealthy to carve up the pie in their favor. In every City or other political region where rules are enforced, they know who can pick up the phone and call the shots. They know who has lunch with the mayor and the bank president. Most working people have other priorities.</p> <p>Sure the boomers were in a position to benefit themselves at the cost of others. But society agreed to let wages be globally influenced, and all generations capable of voting down through the decades that led to this were willing to slit their own throats and their children&#39;s throats by electing the wrong people. Not that there were always good alternatives.</p> <p>Wealth and empire have corrupted a lot of things, its like a game of musical chairs, eventually there is a restart. In the meantime, more and more people are on the sidelines watching.</p></pre>TheBoBiZzLe: <pre><p>Texan here. I see am seeing all kinds of crazy things happen in the real estate world. Tons of homes in my area have been owned by people in their 50-60s. Some large companies have moved in recently and people are offering way over asking prices on houses. They offer up a bunch of cash then lease out to whoever. School districts are falling apart. Crime is sky rocketing. I asked some realtors what&#39;s going on and they said it&#39;s because the sellers are just going for the large cash offer and thinking about the family moving in.</p> <p>Not trying to say lease owners are bad. But when your childhood home now has 8 cars parked in front of it and what looks like three families. Bah.</p></pre>prsTgs_Chaos: <pre><p>Simplest answer; their generation were the ones in charge of the banks and the government when selling mortgage backed securities became a thing. </p> <p>It created an incentive to sell more homes so we had more mortgages to bundle into securities and sell. This forced banks to give loans to people who couldn&#39;t afford them and to do so they didn&#39;t vet you. Then the securities went from being filled with reliable people to being filled with shit loans that were at high risk of default. They weren&#39;t fixed rate and when the rates went up in like 2007 tons of ppl defaulted and by that time so much of our economy was tied to it that it caused a huge crisis. </p></pre>BecauseIwasjust: <pre><p>What is really interesting, and important, is that all millenials across the western world seem to be having the same problem with boomers (most likely their parents). I look forward to the day our parents retire and we become world leaders and decision makers. Perhaps then we&#39;ll be able to start turning our economies into those which help everyone, not just the older genetation, and start reversing climate change (again a problem with boomers). My parents (and their generation) have never held the same view as me on many important issues, so I don&#39;t know why they think they can represent me in parliament. Maybe thats why they don&#39;t even try...</p></pre>Cesium6: <pre><p>Boomers ruined the entire economy with their selfishness. </p> <p>If you have the time and interest in the topic, I would suggest reading: “A Generation of Sociopaths” by Bruce Cannon Gibney <a href="https://itun.es/us/vFcBdb.l" rel="nofollow">https://itun.es/us/vFcBdb.l</a></p></pre>vfxdev: <pre><p>There was no cable TV in 1960. -$100/month</p> <p>There was no cell phones in 1960. - $125/month.</p> <p>It was very rare for a couple to have 2 cars in 1960. -$300/month.</p> <p>There were just a lot fewer things to spend your money on, no Amazon for instant gratification. People need a lot less, consumerism/materialism was in its infancy. Many people could sew, grew own food, etc. -$100/month.</p> <p>That&#39;s 625 a month, 7500 a year, or 22.5k after 3 years. You could buy a 200k house with PMI.</p> <p>A lot of children of baby boomers turn up their noses at the kind of houses our parents/grandparents bought. They don&#39;t want the 200k starter home to grow equity, they want a status symbol.</p> <p>edit: I&#39;ll take down votes. I know you guys get triggered when someone explains the harsh reality that you can&#39;t have everything you want and buy a house at 25.</p> <p>edit2: sad to see so many defeatists. The secret to getting ahead is to actually getting started. Pouring over median income graphs looking for excuses does nothing to better your situation. My parents were boomers and worked 2 jobs, nights, and weekends to put food on the table. With all the time you guys put into Xbox you could have learned how to build an actual house</p></pre>BoggleWash: <pre><p>I hope all of you scrolling down this page have seen that there are a multitude of answers to this.</p> <p>We should specifically be blaming the politicians who <em>took advantage of the boomers naivete</em>. Blaming the boomers themselves is useless because:</p> <ol> <li><p>You can&#39;t teach old dogs new tricks</p></li> <li><p>They&#39;ll be sick and dying soon so do you really want to blame the sickest and poorest among us?</p></li> </ol></pre>Derpaderp0514: <pre><p>Old prick buys house for $25,000. Doesn&#39;t do any work to it, rents it out 20 yrs later for $3,000 a month. Goes to sell it after making money on an already paid off house. Lists for $250,000 because they dont need to sell.</p> <p>This is my colorado experience. Mining houses from the 1800s, under 1k sq ft for $200k plus.</p> <p>I&#39;m paying $1,500 a month+ utilities to live in a garbage ass house I wouldn&#39;t owner finance for $100k if it was offered to me tomorrow. 2 bed/1ba on a small lot. Not in a city and not walking distance to a ski resort. </p> <p>My dad is a flooring contractor (subcontractor when he was able to support him, my mom, and myself and still afford a down payment on his first house 20 ish yrs ago)</p> <p>I&#39;m in my mid 20s and wouldn&#39;t doubt I make as much if not more than he did at the same time.</p></pre>BethlehemShooter: <pre><p>Well duh!</p> <p>And before that, they ruined the job market.</p> <p>Now they have moved on to ruining the Healthcare market.</p> <p>And before they&#39;re done they will ruin Social Security and Medicare.</p> <p>I know because I&#39;m at the tail end of the boomer cohort (1959) and have felt it every step of the way.</p></pre>clams4reddit: <pre><p>Ah this triggers me so much. It makes zero logical sense. They hold positions of political, economic, societal, and educational power. Yet they want to blame all the issues that society has on younger generations. That have no say on policy. That we taught everything they know by baby boomers. In a world created by baby boomers. It&#39;s fucked up and i don&#39;t even understand how people side with that &#34;millennial are the worst and cause of all issues&#34; arguments they make. </p></pre>sophistibaited: <pre><p>...oh my god such long posts to describe what really amounts to something very simple. </p> <p>Because <em>responsible</em> suburban homeowners (&#34;boomers&#34;) were in debt in parallel with subprime mortgage holders who were granted credit regardless of whether or not they qualified.</p> <p>It&#39;s not boomers who were at fault, it&#39;s irresponsible folks who were given houses far beyond their means to pay, mostly thanks to government pressure on banks to counter accusations of &#34;discriminatory&#34; lending practices.</p> <p>ProTip: Any answer that requires a dissertation is a complete obfuscation of reality.</p></pre>somewittyalias: <pre><p>There is another important issue that I have not seen in this thread: babyboomers keep living in their huge home even after all the children have left. They should move into smaller homes or condos so that people who really need family homes could get them. The supply of family homes is probably in oversupply right now relative to the number of actual families, but it looks like there is an undersupply because so many old couples still live in them.</p></pre>Styphelus: <pre><p>Millennials are just looking for excuses. They want big homes like their parents without having to work for a lifetime like their parents did before being able to purchase a nice size home. They want instant gratification.</p> <p>The housing market has only been an issue in the last couple of years. 7 years ago lots of homes were in foreclosure or going on sale for really cheap. That is when I bought mine for a bargain. </p> <p>Once in a while the housing market creates a bubble. In the late 80s interest rates were in the double digits and you were required to put down 25% instead of 5% today. It was much more difficult to buy a home then. </p> <p>The housing market is already correcting itself with home sales plunging in the last few months.</p></pre>broscientologist: <pre><p>Hold on folks. You can&#39;t talk about the housing market bust without starting with jimmy carter.</p> <p>They had an urban redevelopment program that started 50 years ago. </p> <p>&#34;A home for every American&#34; was the slogan. They put people who couldn&#39;t afford it in homes. It took decades for it to all finally collapse. There was just a movie about this for those who don&#39;t follow politics.</p></pre>nu7kevin: <pre><p>I&#39;m not advocating for the Boomers, but it just occurred to me: what if it&#39;s because Millenials are seeking houses that are renovated and modern like on HGTV? There should be older, smaller houses that cost much less. For example, my sister in law bought a small ranch style for under $100k (yes I understand it&#39;s location specific) but these houses exist in areas with well-paying jobs. She renovated at a reasonably low cost, too. What I&#39;m saying is, it&#39;s possible that Millennials in most areas are looking for houses out of their ball park. Boomers probably bought houses with 4 walls and a roof. Not granite everything, bamboo floors, farm house sink, stainless steel appliances, within walking distance of avocado toast, Whole foods, and a doggy park, etc. There should be cheaper, older house that one can buy and slowly renovate with borrowed home equity plus savings in mortgage difference. All that in the suburb of a small town where there are jobs (e.g. Holland, MI or Madison, WI). Thoughts? </p></pre>sweeny5000: <pre><p>Foreign investment more than anything else has driven up the housing markets here in America. I don&#39;t want to sound like some racist nativist, but on this issue it&#39;s clear, foreign investors should not be able to own property. Being priced out of real estate by outside money really has fucked over the middle class probably more than any single economic factor.</p></pre>autismchild: <pre><p>In the uk we also have the Chinese ruining the housing market they will &#34;invest&#34; in our economy by buying a house in London and never actually living in it then selling it later on as the prices of housing in London keep rising. Apparently there are whole towns nearly full of empty houses because of this in Canada as well. </p></pre>rubthemtogether: <pre><p>Use of a Boomshot in a densely-populated place like a city = destruction = lack of housing = prices rise = inability of the average person to afford said prices</p></pre>Moonthrower: <pre><p>Explained like you&#39;re five?</p> <p>Banks gave loans to people unlikely to pay it back. $200,000+ loan to one income individual, 5 kids, unemployed spouse? Sign here, please!</p> <p>This created a bubble that crashed in 2008. Watch The Big Short.</p> <p>As for blame, it&#39;s split between the banks and government regulations encouraging/forcing loans to high-risk applicants. Maybe a little to people being fiscally irresponsible and getting houses well above their income level.</p> <p>It had very little to do with boomers building or buying houses and paying them off...</p></pre>dasiffy: <pre><p>Simply put, the boomers were the first generation where the majority of women worked instead of being &#39;stay at home moms.&#39;</p> <p>That doubled the income of home buyers, and through supply and demand, raised the prices. Dual incomes buyers could always out bid single incomes buyers.</p></pre>Psychotic_Precision: <pre><p>If I had a dollar for everytime I heard a baby boomer complain about my generation I&#39;d have enough money to buy a house in the market they ruined. </p></pre>Offhisgame: <pre><p>Globalism ruined the housing market. Its not a local market anymore. Its a global one. See Toronto/Vancouver. Alot of the problem is foreigners buying homes. Every major world city NEEDS to have LARGE foreign taxes to curtain this investment in real estate by non residents</p></pre>PacoRamirez1966: <pre><p>They gave loans to people that couldn&#39;t afford it. Mostly minorities. My daughter, a Hispanic, got approved for a 200,000$ house, as a single woman, making 14$ an hour. </p> <p>I ended up talking her out of it and bought the house myself and I am now renting it to her for less. </p></pre>baldmannbob: <pre><p>In America the Boomers got their houses pretty cheap, Sears even had pre-fabricated homes that were bigger than modern homes for as little as $7500 to $1500. They also were unionized, and got Excellant pensions, and are the first on the Social Security System Payrolls.</p></pre>eternal_septuagint: <pre><p>Boomers not &#34;boomers&#34;. The Baby Boomers are a real phenomena of the US military GI&#39;s coming home from WWII knocking boots with millions of women had been largely alone for four years. That created a population bubble that the following, smaller generations are going to have to carry.</p></pre>deathpov: <pre><p>Any boomer here for a comment ??</p></pre>piscisnotis: <pre><p>Boomers didn&#39;t ruin the housing market. Those who are willing to pay top dollar for space they don&#39;t need and can&#39;t really afford are the ones who &#34;screwed the pooch&#34;. And for houses that aren&#39;t worth the money in the first place! </p></pre>Jonnyrocketm4n: <pre><p>Because it&#39;s every generations right to blame the one before. The truth is that most people don&#39;t have the ability to change anything, so blaming a previous generation is stupid and counter productive...but it&#39;s human nature.</p></pre>KaramCyclone: <pre><p>I dont think​ people understand what ELI5 is... I dont think a 5 year old would read all tge stuff that you guys arw writing or understand half of it. When i come to ELI5 i expect to-the-point answers of like 3 lines max :P </p></pre>ForeverBend: <pre><p>Because Baby Boomers are habitually greedy narcissistic pieces of human garbage who selfishly ruin almost everything they touch with almost no care for the consequences. </p> <p>Or to put it simply, the majority of climate change deniers are Baby Boomers. </p> <p>I genuinely believe we may find out later that their narcissism was influenced by some environmental/industrial hazard, similar to lead exposure and violence. </p></pre>Vigilias: <pre><p>It&#39;s not being talked about but I&#39;d have a look at base money created since the 2008 mortgage crash. That will paint a great picture for you of why $140k houses are going for $1,000,000+</p></pre>EpikSwag: <pre><p>Super Simple Answer: They created demand for mortgage-based investments; didn&#39;t consider the ramifications for how that demand was met; and many of those investments went belly-up as a result.</p></pre>Fedora200: <pre><p>I can&#39;t really explain it myself to a full extent or how the boomers are really involved, but the movie The Big Short is very informative on why the US housing crash happened and why.</p></pre>JJiggy13: <pre><p>I bought my house for 10k under market value in a major city 10 years ago. It&#39;s worth less than half of what i paid for it now. My property value has gone down every single year</p></pre>trolololoz: <pre><p>Wow it&#39;s weird how millennials are blaming boomers for how the market was moving at the time. I&#39;m sure the boomers weren&#39;t thinking &#34;lol what I&#39;m doing now is going to fuck other I&#39;m the future&#34;. People just saw opportunities and they went for them. Nothing wrong with that. I&#39;m sure that we are doing the same now.</p></pre>one-hour-photo: <pre><p>because people are stupid and they love to find scape goats. The boomers just bought houses with the best interest rates and down payments they could. Anyone else would have done the same thing. The people to blame are A. the banks that handed out the risky loans, and B. the government that encouraged the banks to hand out the risky loans.</p> <p>And by the way, Gen X probably had more to do with this than anything as they were the ones who were doing the majority of the buying during this time anyway.</p></pre>quinlivant: <pre><p>lol I know what depression is. I suffer from both, peaks and troughs. Sometimes it&#39;s completely fine during the winter and others can just exacerbate things.</p></pre>pokietrama: <pre><p>This social contract also came with an emerging millennial market who like the same buying power that baby boomers had built to keep up with demand.</p></pre>jaredwards: <pre><p>It&#39;s just a scare tactic used to deter people from trying psychedelics. There is no evidence that magic mushrooms have any connection to addiction. </p></pre>nysgreenandwhite: <pre><p>Rich bosses want workers to fight each other instead of fighting them. You have more in common with a working class Boomer than a rich millennial. </p></pre>bzxzp: <pre><p>Because they all want to live in big cities, and get upset when they can&#39;t afford it. The US median house price is under $250k, pretty affordable</p></pre>insightlife: <pre><p>Because they are ill informed. </p> <p>The primary reason the housing market is so expensive is wages haven&#39;t moved in three decades. </p> <p>Wages haven&#39;t moved in three decades because the 1% are greedy fucks. </p></pre>Littlewigum: <pre><p>In places like New York and San Francisco, they use historical housing designation and laws about views limiting height, respectively, to prevent greater population density. Palo Alto count use some skyscrapers but you will never see that.</p></pre>Hyperdrive3: <pre><p>Sentiment is the issue is that finally demand exceeds supply, and are unable to tell good products from bad ones.</p></pre>UpChuck_Banana_Pants: <pre><p>There is a Japanese cartoon that has robots called Boomers. </p> <p>Your question led to a weird thought in my mind. </p></pre>crimsonBZD: <pre><p>In the US, what they mean is that those in the Baby Boomers generation were selling others in that age group super easy loans that most would never had been able to pay back. The bankers knew they&#39;d default on them, so they got to profit and get the house back.</p> <p>So they basically collapsed the economy based around houses because they were financially ruining people (and people were walking right into the trap) thinking they can finally own a cheap and good house.</p> <p>Now, houses cost a lot more than they probably should considering inflation and the median wage of the average man, and now someone in my generation will have to take out a huge loan just to get a mediocre house, and when the market stabilizes we&#39;re still going to be paying off these huge loans however equivalent houses are suddenly half the price.</p> <p>For example, my mom bought her huge ass house pre-collapse, thing has... 3 bedrooms, an additional psuedo-bedroom (that was listed as an office,) two living rooms, two dining rooms, a kitchen, an expansion, deck off the side of the house, built in garage, full size partially finished basement.</p> <p>... at slightly less than the cost I today could get a 2 bedroom, unfinished basement, 1 kitchen no dining room 1 living room, that is less than half the size of my mothers house.</p></pre>LebronGenuineDraft: <pre><p>Because we&#39;re&#34;smart&#34; enough to not just buy over-priced bullshit, suburban homes like previous generations.</p></pre>DopeyLabrador: <pre><p>Some very verbose answers so here&#39;s a short one:</p> <p>Property became more about speculation than habitation.</p></pre>notMcLovin77: <pre><p>It&#39;s a scapegoat so no one can criticize the mystical economics of the real estate and banking industries</p></pre>Resvertide: <pre><p>It didn&#39;t help that a certain president relaxed lending laws for home loans right before his term ended.</p></pre>Captivecurve: <pre><p>Hey if it wasn&#39;t for Boomers there would be way more casualties at the Second Battle of Hoover Dam! </p></pre>inomorr: <pre><p>An ELI5 explanation - Housing prices are a function of Supply and Demand. If Demand is very high and Supply is low, prices will rise very fast. </p> <p>On the demand side, the Baby Boomers had tons of babies and created a population boom, which has greatly increased demand. (note: there are of course other factors also that have increased demand)</p> <p>On the Supply side, the Boomers bought houses when they were young and they now live longer and longer, resulting in the houses not coming back on the market. Several of these houses are too large for the Boomers, but it&#39;s too much hassle to downsize (plus they don&#39;t face much pressure to downsize). (note: there are of course other factors also that impact demand)</p></pre>: <pre><p>[removed]</p></pre>Teekno: <pre><p>Your comment has been removed for violating Rule #3:</p> <p><strong>Top-level comments must be written explanations</strong></p> <p>Make sure these comments are answering and explaining the question asked in the post.</p> <p><em>Replies directly to OP must be written explanations or relevant follow-up questions. They may not be jokes, anecdotes, etc. Short or succinct answers do not qualify as explanations, even if factually correct. Links to outside sources are accepted and encouraged, provided they are accompanied by an original explanation (not simply quoted text) or summation.</em></p> <p><em>Exceptions: links to relevant previous ELI5 posts or highly relevant other subreddits may be permitted</em></p></pre>Cheesygobs123: <pre><p>The boomers covered the housing market in boomer bile which then attracted the horde to attack it, and none of the other markets have a firstaid kit so now the housing markets on low hp.</p></pre>Pandasekz: <pre><p>As I see a decent amount of non-US posts, the issue for the US is still very in line with other countries in regards to the why. To explain like you were 5:</p> <p>The people who were in charge of giving people money for houses forcibly changed the rules around giving out money to buy a house. Because they were no longer picky in who they gave money to, some people were taking more money than they could afford to pay back. When they couldn&#39;t afford to pay it back, the house became the banks house and they had to re-sell it for a loss.</p> <p>These same people also stopped paying people a decent wage starting in the mid 70&#39;s til today. Instead of increasing salaries for the people in the middle, they stopped increasing their pay at the same rate that costs went up by, which means that you&#39;re making the same amount while things get more expensive. </p> <p>This underpaying employees over the course of 40 years (while ensuring executive salaries increased by 300%), and the deregulation of the banking industry for housing loans are the two most important factors as to why we saw the collapse we did. </p></pre>quinlivant: <pre><p>Bearing in mind this is a cheap city and that&#39;s a cheap flat (this isn&#39;t in the centre btw)</p></pre>Bobloblawlobslawbawm: <pre><p>Because they treat houses as retirement funds and piggy banks. It means houses are far too expensive for our generation to reap the benefits of home ownership that they have. </p></pre>b009152: <pre><p>ITT people blaming people for taking advantage of Govt programs that naturally have unintended consequences, then advocating for more government intervention. </p></pre>Mike12344321: <pre><p>They did a lot more than ruin the housing market. The housing market being in shambles is a direct result of boomers ruining the economy in general.</p></pre>LiamW: <pre><p>Ignoring wages vs. housing costs.</p> <p>Legitimate reason to blame boomers:</p> <p>Boomers have consistently put forward legislation to deny new construction, reduce costs of existing ownership vs. new buyers (California Prop 13 being the most egregious), tax incentives (mortgage interest tax deduction), etc. </p> <p>Other factors (that you can&#39;t really blame them for):</p> <p>Increased population of cities = increased demand for housing in cities</p> <p>Increased access to credit and lower interest rates = increase in prices due to affordability (larger pool of buyers).</p> <p>Logical investment value of housing (land is not being created) coupled with earning power of older boomers vs. young buyers.</p> <p>While many of the benefits of home ownership benefit all homeowners, they almost always benefit existing or long-term owners more.</p></pre>smallmall: <pre><p>The baby boomers are the worst generation. They inherited so much from the greatest generation but they completely screwed over the next. Pensions, social security are dried up housing is higher then salaries. They actively downplayed global warming. They squandered their chance to make the next generation better. greedy folks they are. I look forward for them dieing off so my generation can right the ship. Assuming it isn&#39;t to late which it likely is. </p></pre>HideAndSeek: <pre><p>Because kids weren&#39;t properly educated by their parents.</p> <p>Not on the effects of saddling themselves with $25k-$100k in student loan dept.</p> <p>Not about the wealthy &#34;gaming the system&#34; via media propaganda and governmental regulation to effectively to extract all the wealth (and now freedoms) from the non-wealthy.</p> <p>Not about the simple plain truth of choices. You don&#39;t have to live where it&#39;s expensive to live. You don&#39;t have to surround yourself with mountains of shiny possessions. You can actually choose your own quality of life. </p> <p>EDIT - Or, maybe the parents did, and the kids decided to roll the dice and take on that debt with the thought process that they&#39;ll hit the life lottery after college.</p></pre>eggery: <pre><p>Why are there so many examples for Australia​ in here?</p></pre>Potatoexe: <pre><p>Would you like an exploding zombie in your house?</p></pre>XanderPrice: <pre><p>Boomers were the last generation to enjoy the prosperity of the West before destructive government policies began deteriorating life for everyone. The government is good at controlling the way some people think so they&#39;ve convinced a small minority of our population that boomers are to blame for many problems of today. Just so happens that most users of reddit fall into that small minority so blaming boomers is prevalent here. Almost anywhere else people blame the true problem, our governments. </p></pre>shyron13: <pre><p>This is not the answer to the asked question, but I have to say this. 30-40 years later, future generation is going to ask the question of similar tone about how our generation fucked up the climate so bad? Guess we are going to be &#39;climate change boomers&#39;..</p></pre>notsureifsrs2: <pre><p>Because wages haven&#39;t risen fast enough for a lot of jobs to afford housing. What does the average person do when they can&#39;t have? Focus all the resulting emotional trauma from their self hatred, bad luck, and failures on those that can. </p></pre>foosballallah: <pre><p>Too bad we can&#39;t pay our mortgage in tears. Seems like a cryfest here about how someone else screwed it up for them. Quit caring about who screwed you, put down the game controller and get out there and make your own future. Get the job you want, save your money and buy the home you want. If you let negative people give you negative messages then you will be self destructive. Baby boomers aren&#39;t buying their own homes, millennials are. What&#39;s the difference between you and them? </p></pre>Faeleena: <pre><p>Basically the sum of all this &#39;Boomers ruined everything&#39; is we need to wait for them to pass before things get better. A morbid and sad reality. </p></pre>by-jupiterscock: <pre><p>Boomers are the worse generation the modern world has ever saw.</p> <p>Not only to top guilded comments are 100% correct but they also managed to pollute more and damage the environment than all of the previous generations put together, and to add insult to injury they call the younger generations lazy and entitled</p></pre>criffo: <pre><p>So I&#39;ve taken one thing from the majority of these comments, and it&#39;s that the elderly were given an inch, and have taken miles over time. </p></pre>MudIsland: <pre><p>So they should voluntarily give up their neighborhood for the greater good? Yikes!</p></pre>
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