Debt and spending out of favor in 2012?
Some analysts are predicting 2012 will be the year Baby Boomers and their parents will begin to really show, through more personal conservative spending habits and more frugal lifestyles, that they understand and believe, austerity is in Americas future.
These demographic groups have driven markets of all kinds since World War II. They taught America how to spend money and how to borrow money, like no generations before them. Home mortgages, credit cards, auto loans, equity lines, and credit has been a staple of their lives. Just look at the overall size and scope of local, state, and federal employees, regulations, amount of public and private debt, and spending policies of our current government.
The Baby Boomers own this government, the policies, debt, and all else it encompasses. The lack of entitlement program reform speaks to their inability to honestly face and deal with the really tough issues. Time is running out. They elected the people who have represented America over the past fifty years. We have created a welfare country with no visible means of funding it. Sure FDR created social security in 1935, but we failed to reform it, and it was designed to be social welfare, not entitle people.
They coined the phrase OPM (other peoples money) and in one generation using leverage, drove local, state, federal, and personal debt levels to the edge of the cliff. Accepting historically high levels of consumer and government debt as normal. Now faced with fixed incomes and basic non discretionary food, energy, and health care inflation, they are at the cross road of their lives.
Today they are caught in an emotional riptide between feeling entitled to a certain standard of living and bankrupting America. Through lack of conservative government reform, entitlement reform, tax reform, and balancing our National budget the self declared ME generation is poised to selfishly steal their own children and grandchildrens futures.
The 2012 presidential election will define just how selfish they really are going forward. They do not have a great record of being financially conservative or doing without and they value materialism highly. Materialism is closely tied to their measure of each other, themselves and success. They view cutting personal consumption and a lower standard of living as some great sacrifice.
As a group they have not saved anywhere near enough money to live out their lives independently. Home equity was the Nest Egg, and the golden goose has died. Today real home equity is negative or nonexistent for many. They are locked in place. Inflation, in food, energy, and health care will be an ongoing battle with relatively fixed or falling future incomes. The fixed incomes will also affect availability of credit for most. They are, very grudgingly, coming to understand that debt, public and private, is the enemy and less spending and affordability are the issues of the day.
With two solid generations of living beyond our means and needs combined with access to leverage and the associated risks, we have stacked up huge future financial obligations, public and private. Along the way neglecting upkeep and maintenance of our nations vital infrastructure.
These two generations of Americans will continue to drive some real estate markets. Many are going to find smaller and more efficient homes are better financially. Retirement markets will be the most directly impacted This will be like a wet blanket on home prices above national medium price of $164,000 in many real estate markets.
For retirement housing markets, understanding the needs and abilities of the target market with product focus and marketing will continue to be the key to new home sales and construction. Housings additional costs of living including energy consumption, water, taxes, insurance, internet, cable TV, HOA and SIDS fees, sewer and garbage collection fees will all be considered in addition to price. The notion of a second home is out of the question for most. The question is; can they, rather will they, become frugal like their grandparents or will they continue to demand even more instant personal gratification.
The broadest real estate market appeal of tomorrows retirees will be dominated by smaller, more efficient and affordable home markets.
John F. Kennedys words, And so, my fellow Americans, ask not what your country can do for you; ask what you can do for your country seem lost to the self-serving greed and entitlement mentality of today . You ask Where did the current socially entitled, welfare and regulatory state that is eating America like a cancer come from? Take a look in the mirror.
Our great nation was built on the ideals of Life, Liberty, and the Pursuit of Happiness, however none of us are entitled to leave our heirs with trillions of dollars in unfunded debt. The upcoming election will be the most important votes we have or will cast during their lives.
We are faced with a simple question, will we be the first generations in American history to leave our Great Nation in worse shape than it was when we inherited it, or will we step up and sacrifice today, for a better tomorrow.
Just for perspective, if you take dollars for miles our current national debt will make over 39 million trips to the moon. The debt is $15,235,000,000,000 and its 384,000 miles to the moon. Of course 39 million trips to the moon wont be compounded by interest!
Chris W. Miller
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