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We are all ‘greater fools’ now: How can you sell your house to a big family when big families don’t exist any longer?

Markets go up. Markets go down. But the whole house of cards is built on the idea that population will grow. What happens when it doesn’t?

matt-king-most-depressing-slide

From Business Insider:

It’s what I like to call “the most depressing slide I’ve ever created.” In almost every country you look at, the peak in real estate prices has coincided – give or take literally a couple of years – with the peak in the inverse dependency ratio (the proportion of population of working age relative to old and young).

In the past, we all levered up, bought a big house, enjoyed capital gains tax-free, lived in the thing, and then, when the kids grew up and left home, we sold it to someone in our children’s generation. Unfortunately, that doesn’t work so well when there start to be more pensioners than workers.

The entire welfare state is built on the idea that young people can be milked of their wealth because they’re too busy being young to notice.

Alas, the welfare state also awards adults either for not reproducing or for reproducing in only the most wealth-destructive ways. The consequence (entirely foreseeable) is that the number of dependents-by-choice goes up while the number of de facto slaves declines — by people either opting out of producing wealth or opting in to the welfare state’s “free” benefits or, as here, by not being born in the first place.

This will not end happily…

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  • If you don’t have to sell into the current Phoenix real estate market — don’t. But what if you do have to sell…?
  • Ask the Broker: Should I Wait Until January to Sell?

  • 5 comments

    5 Comments so far

    1. Thomas Johnson March 26th, 2013 8:42 pm

      Rather than barren Richard Florida “Creatives” my city should focus on attracting fecund young folks without un-dischargeable (by bankruptcy) student loans and that have incomes.

    2. Richard March 30th, 2013 10:14 am

      http://www.fatwallet.com/static/attachments/254535_marginal_tax_6.png

      This chart shows how, and how badly, people get penalized for working and earning income, in a broad income range encompassing a tremendous number of people. The “cliffs” are especially bad in that they indicate effective taxation rates of 20-50,000% on a marginal dollar.

      Yes, these cliffs could be fixed with smarter means-testing and flexible thresholds. But when it is this bad, we’re no longer talking about modest inefficiency: we’re talking about a system that penalizes work so harshly that it calls into question the credibility of any tax policy that combines progressive taxation with social welfare nets.

      I would be interested to extend the chart up to 200K and see what cliffs come into play with the AMT and phasing out of deductions such as student loan interest and Roth IRA eligibility.

    3. Emma Forsberg April 2nd, 2013 8:02 pm

      But when the student loan bubble pops, won’t there be a greater need for people to move back home with mom, dad, grandma and grandpa? Multi-generational homes should be a hot commodity right?

    4. Nick Gioia April 3rd, 2013 7:45 am

      In Baltimore, Maryland the population is slowly retracting. Retired baby boomers are creating a black hole in our inventory by creating an oversupply of Mansions. Everyone is looking to downsize, due to the cost associated with heating and cooling those palatial 2 story great rooms and vaulted master suites built in the boom years.
      To add insult to injury, most retirees who downsize realize that Maryland is not very friendly to their wallets and ultimately decide to sell their new Baltimore condos or townhome in exchange for more tax friendly states.
      This trend in addition to the new generation in our area who have different priorities which run counter to the classical societal stereotype – Get married, raise a family and work toward retirement in 30 years.

    5. cooksquared April 3rd, 2013 3:03 pm

      Like everything in this world, our housing will evolve. New homes are being built today with mother-in-law suites. Whether because of increased demand or better affordability, we are also see a trend towards smaller homes. The Mcmansions seem to be phasing out.

      In a world of supply and demand, I dont think it will take a generation to sort out this issue.