Dave Yost: Don’t blame baby boomers for home prices
Silverthorne and Wisconsin.
Given that the topic of home costs is not something that is going to fire up the masses and generate a ton of crank phone calls, I have no problem writing about Mr. McAbee’s column on what the “baby boomers” supposedly did to house prices.
The first point I would leave for Mr. McAbee is that home prices on a national basis were in fact on a steady appreciation slope up to around 2000-2002. From long before the early ’70s, when the first baby boomers started buying houses and getting jobs that had anything to do with house prices, there was a fairly good reference point to determine how much house you could afford. A mortgage loan was generally obtainable in the range of 2.5 to 3 times your income. You also required at least 10 percent downpayment to buy a home, and even then you needed to purchase mortgage insurance. Mr. McAbee’s figure of about $100,000 for a home for a family making $25,000 a year is probably a pretty good number, but he fails to mention that many people can count two incomes when buying a home, thus a $50,000 “family,” married or not, could usually get a loan of at least $150,000 toward a $170,000 property. Future homeowners had to actually save some money or generate enough investment income in order to generate the cash for a down payment. Instead of “investing” in travel and new cars, many of us baby boomers “invested” years in college so we could have an upper middle income or higher. This would be more than about $60,000 a year in today’s dollars.
Starting in the late ’90s and more so in the early 2000s, the notion of some set of rules surrounding the mortgage process as well as the way the banks and Wall Street treated mortgages went completely nuts. Home loans turned into gambling devices that allowed speculators to drive up the price of housing so high that only the rich could afford homes with the pre-2000 rules. As a result, an entire sub-prime industry evolved around getting people into homes they could not afford. Contrary to what some would argue, this was not a government ploy to give away homes to low income people. Rather, it was a massive game, bordering on pure fraud in my mind, that turned home loans into complex investments called CDOs.
Were all the individuals who were responsible for this change in banking and mortgage rules baby boomers? I think not. In fact, many of the Wall Street, hedge fund and mortgage executives who led the migration to what later would be a complete financial meltdown were in their 40s; late baby boomers at best. While I think it is fair to condemn the group of individuals who invented adjustable rate mortgages and securitized mortgage products, I do not think it’s fair to assume they were all baby boomers; many of which got screwed in the process of trying to sell a home they lived in when they were forced to retire at 55.
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