Retirement and the housing industry

While it appears that the econ­o­my is well on the way to recov­er­ing from the late 2000’s, the hous­ing indus­try is still far behind.

Millennials, who make up a huge pop­u­la­tion are back to the pre-reces­sion era unem­ploy­ment lev­els of 7.7%. Unfortunately, they haven’t been able to estab­lish them­selves as adults in oth­er ways, like own­ing a home or get­ting mar­ried. (source)

They’re still liv­ing at home and delay­ing get­ting mar­ried.

We all know that real wages aren’t increas­ing. I believe that real cost of liv­ing is grow­ing faster than we mea­sure too (think of col­lege edu­ca­tions, or the addi­tion of ‘nec­es­sary’ tech­nol­o­gy in order to par­tic­i­pate in the new econ­o­my as exam­ples).

So, they’re earn­ing less rel­a­tive to their needs. They’re not get­ting mar­ried, which adds some fis­cal effi­cien­cy before kids are born. And, while it’s always been dif­fi­cult to save for retire­ment, it’s not get­ting any eas­i­er.

And, they’re not buy­ing homes.

I have a hypoth­e­sis that home buy­ing has always been a mea­sure of forced sav­ing. And while not as tax-advan­taged as IRA’s and 401(k)‘s for retire­ment, because of the long-term nature of mort­gages home buy­ing serves as a pseu­do-retire­ment strat­e­gy.

The oppor­tu­ni­ties home buy­ing offer as a retire­ment strat­e­gy mean that peo­ple can either live “rent-free” after the mort­gage is paid off, or down­size and cash out. They implic­it­ly depend on these ben­e­fits lat­er in life. Whether or not they’re acknowl­edged when they first buy their homes.

What if there’s some sort of freako­nom­ics rela­tion­ship between home buy­ing and retire­ment, that we’ll only find out after it’s too late?

What if in 30 years from now, because peo­ple aren’t buy­ing homes today the retire­ment pic­ture is 50% worse than it is today?