Originally posted by @Alan Grobmeier:
Although it is true that the Millennials aren't buying homes, that is NOT where it all starts/stops.
Over the next 15 years we are going to have ZILLIONS of baby boomers exit the workforce and retire.
The problems we have are as follows:
1. Millennials have been saddled with massive school debt, which can be as much as a house note.
2. They are not making enough money to service this debt, let alone take on new debt.
3. They dont invest like previous generations. Investing is a fantasy. So, when the baby boomer goes to sell their stock, WHO is going to buy it? Answer: NO ONE. The market will, eventually, fall like a rock.
We, as a country, are in for some HUGE changes over the next 15-20 years. Corporate pensions: Underfunded and Under-insured. State/Local pensions: Underfunded due to unrealistic 'models'. Govt pensions: Underfunded, but they can print more money ;-). 22 TRILLION in debt, and counting higher every day. Who is gonna pay that? We can no longer 'inflate' out of it or we are going to look like a 3rd world country or banana republic. Although some may say we are already there.
As an investor, I have seen prices of RE almost double in my area since 2010. It's not sustainable. My rents are up significantly, but I know my tenants incomes' are not up significantly.
My belief: Recession in less than 24 months. And it won't be good. :-(
I think this can be a good discussion and you are throwing a lot of things out there. I don't know what analytics you are pulling from to create your opinions or if you are just reciting what you've read or heard elsewhere.
A couple comments about your points.
1. Millennials have been saddled with massive school debt, which can be as much as a house note.
This might be true, but to what degree? My college debt was larger than my parents because they didn't go to college. Also, my house debt was more because of inflation. I also earned more in my job in 2000 than someone similar would have in 1960. Student debt may become an epidemic on it's own, but it by itself might not be enough to cripple our society. Many millenials may also have access to purchasing power to buy multiple houses (become landlords themselves). If you have numbers on average debt, average incomes, average access to credit, we can further diagnose if we are in trouble.
2. They are not making enough money to service this debt, let alone take on new debt.
Do we know what percent of millenials are defaulting on their debt? Also, the ones who are not (if there is a growing wage gap of rich and poor) do they also have the ability to purchase multiple properties? Perhaps Gen X'ers had 1 in 20 defaulting, but 3 in 20 could afford 2 properties. Are we now seeing millenials with 1 in 8 defaultings, but 3 in 20 who cold afford 5 properties each? (Poor getting poorer, rich getting richer)
3. They don't invest like previous generations. Investing is a fantasy.
Do we know this? Again, maybe the richest 5% are investing far more any ever before? Also, if they aren't investing, what are they doing with their money? Just paying more in rent? If so, are they living at home paying rent to their parents or are they paying to baby boomer landlords? Things I don't believe they are investing in are ultra expensive cars and diamond rings.
If you have more stats to outline this, I'd be happy to discuss in more detail, but what you throw out are generalities. From personal experience I see millennials joining the workforce making far more than I did when I started. Part of this is due to inflation which ultimately is what keeps our nation going generation to generation. I didn't invest in my first 5-10 years of working.
Baby boomers
One other point, with so many baby boomers leaving the workplace, who will take those higher paying jobs? Either companies will need to take additional profits or they will pay someone else those wages. I was expecting this massive exodus of baby boomers to start 10 years ago as baby boomers started hitting age 65. Now, 10 years late, the youngest baby boomers are turning 60 and the ones who are retirement age have been slow to leave the workforce.
There will be an impact when the baby boomer generation fully retires and again when they pass away, but I don't know if that means despair for those of us remaining.
With the technological changes where the very core of how we work is changing (people working remote for example and less reliance on a motor vehicle), I think it's really hard to predict doom and gloom.
Yes, we will have recessions, but I doubt anything close to what compares to 2008. If you have further details to illustrate this collision course with a terrible recession, I'd appreciate anything you can share so I can better draw a conclusion to prepare for it.
