"The world has changed," explains the 27-year old daughter of David Stevens - CEO of the Mortgage Bankers Association. Despite her father's constant 30-year pitch of the merits of homeownership - and knowing full well that rates are low, rents are high, and owning a home 'builds wealth' - Sara Stevens is not buying. After watching "cousins and other family members go through pretty tough situations in 2008 and 2009," her skepticism is broad-based as Bloomberg reports, t’s more than the weight of student loans, an iffy job market and tight credit -- even those who can buy are hesitant. As Bloomberg so eloquently concludes, when even the cheerleader-in-chief for housing can’t get a rah-rah out of his daughter, you know this time is different.
Six years since the collapse of Lehman Brothers triggered a financial meltdown, some young adults are more risk averse and view the potential upsides of status and wealth more skeptically than before the crisis, altering the homeownership calculation. It’s more than the weight of student loans, an iffy job market and tight credit -- even those who can buy are hesitant.
The doubt is so pervasive that it’s eroded entry-level sales and hampered the recovery. In May, the share of first-time buyers fell for the third month, to 27 percent, according to the National Association of Realtors. Historically, it’s been closer to 40 percent of all buyers.
“We have a younger generation that has sat on the front lines of this housing recession,” said Stevens, 57. “They’re clearly being more thoughtful about it and they’re clearly deferring that decision.”
As the charts above show, Sara Stevens and other millennials -- the generation born beginning in the early 1980s -- started coming of age just as housing collapsed.
Sara was just out of college in 2009 when President Barack Obama put her dad in charge of the Federal Housing Administration. Part of his job was to lobby Congress not to dismantle the financial architecture that had made it possible for generations of Americans -- including himself -- to buy homes. He also was juggling pleas from family and friends who couldn’t pay their adjustable-rate mortgages or sell their devalued houses.
“I watched cousins and other family members go through pretty tough situations in 2008 and 2009,” Sara said.
Most still aspire to own, though just 52 percent consider homeownership an “excellent long-term investment,” according to an April survey from the Chicago-based John D. and Catherine T. MacArthur Foundation. And almost three-fourths of adults 18 to 34 years old say the U.S. still is in the throes of a housing crisis, a bigger share than any other age group.
Nothing to fear but fear itself (and massive wealth destruction)...
“We’ve weathered the storm of the crash and Lehman going under better than they have,” said Fleming, 42, calling millennials jaded. “Like their grandparents who went through the depression, they’re apprehensive about overextending themselves.”
At the Stevens household, it’s not lost on Sara that a cheerleader-in-chief for housing can’t get a rah-rah out of his daughter, especially when she’s done everything right.
“There was a sense that the window was closing to get a good deal and be able to participate in the American dream,” Buckley said. Today, there’s “tremendous uncertainty about whether the value of that investment is going to be worth the commitment and risk.”
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No matter all that "reality" - the Fed and its apologists will keep plugging away at the same transmission channels... but this time (as noted above) that transmission channel merely moves the American Dream further out of the grasp of first-time buyers, the middle-class, and anyone aspirational enough to desire a home... and shifts it squarely into the wealthy driving inequality even wider... As we noted previously, perhaps that is the greatest Irony of Obama's presidential demands to battle inequality...
Inequality in the U.S. today is near its historical highs, largely because the Federal Reserve’s policies have succeeded in achieving their aim: namely, higher asset prices (especially the prices of stocks, bonds and high-end real estate), which are generally owned by taxpayers in the upper-income brackets. The Fed is doing all the work, because the President’s policies are growth-suppressive. In the absence of the Fed’s money printing and ZIRP, the economy would either be softer or actually in a new recession.
The greatest irony is that the President is railing against inequality as one of the most important problems of the day, despite the fact that his policies are squeezing the middle class and causing the Fed – with the President’s encouragement – to engage in the radical monetary policy, which is exacerbating inequality. This simple truth cannot be repeated often enough.