There is a beautiful park near my CA home where six to ten boomers show up every morning at 7 AM to let their dogs run.
I’ve gotten to know them well over the years – and this is what is the most interesting.
ALL of them bought their homes in the 1990s or early 2000s for anywhere from $400,000 to $900,000 – and ALL of those homes are now worth $2.5 to $3 million.
And – if anyone threatens to take away any of that equity for any reason, they will rise up in ferocious anger.
To their credit, they all live very frugally and have taken on little new debt, preserving their equity.
But the bulk of their equity was simply a result of irresponsible government spending (inflation) and extremely severe restrictions on the supply of housing (it wasn’t actually “shrewd investing”).
The policies that drove up home prices are at the expense of Gen Z in two ways: (1) homes are now far too expensive for much of Gen Z to buy; (2) poor Gen Z has to service all of that extra government debt that subsidized boomers.
Poor Gen Z also must contend with a much slower economy (because of those policies), inflation in general, and the burden of having to subsidize many of the pensions that boomers demanded.
Housing Affordability
Politicians love to address housing affordability with subsidies to make it easier or cheaper to buy. These subsidies include tax breaks, down payment assistance programs, looser credit standards, lower interest rates (via QE), and tax-free withdrawals from retirement accounts for down payments.
The Trump administration is pushing many of these subsidies in an effort to show that they “care about affordability, darn it!”
And every time I see one of these programs, I blog about it and remind readers that subsidies ALWAYS end up making housing more expensive, only helping the current crop of buyers who can take advantage of the subsidies before they result in higher prices.
To address affordability, what we really need is far more housing supply – as everyone knows – as that will actually bring down the price of homes.
And politicians know this.
But – if the price of homes fall, boomers will be big mad. And boomers vote.
There are some 63 million boomers – and well over 70% of them vote in Presidential elections.
There are even more Gen Zers, but only about 45 million are eligible to vote. And of those 45 million, less than 50% actually vote. (Source: Internet)
So, there you have it.
One reason politicians continue to subsidize demand instead of supply (which will bring down prices) is because they are terrified of boomer wrath.
And boomers vote.
A lot.
