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Without big bucks, are hip urban neighborhoods worth it? That’s the question that has “Generation Broke” and some babyboomers sparring on Boston.com real estate blog today. If they both step back and are willing to stretch their perspectives, this article will help explain the growing disconnect between housing supply and demand:
How the Housing Crisis Shafted the Next Generation
Before the close of the last century, the Dotcom bubble created an oversupply of high paying jobs locally and trillions of dollars in paper wealth nationally. Both eventually vaporized, but not before trillions in paper wealth moved into real estate. That enabled parents to tap their bloated home equity to pay college tuition, help with adult children with down payments and cosign loans.
A decade later, all of that has changed and millions in each generation have been hurt as described below:
“…the intergenerational connections that long defined the American Dream have been stretched to their limits, pitting seniors against young people, whites against blacks and Hispanics, and the wealthy against the poor, according to experts.”
“Today, students graduate burdened with debt, homeowners owe more on their homes than they are worth…”
“At the same time, more and more seniors are struggling to make mortgage payments or hold onto their homes, let alone help their children or grandchildren with tuition costs.”
“On average, house prices have fallen by more than 30 percent from their 2006 peak, while housing wealth has fallen by over $7 trillion, according to industry figures. This has led to 11 million homeowners who owe more on their mortgages than their homes are worth, an amount totaling about $700 billion.”
What’s the bottomline? Nothing can replace the catastrophic collapse in home equity or mend the intergenerational breach quickly. But as purchasing power shrinks and Generation Y and others downsize their housing expectations, micro-lofts and A-Dorms (adult dorms) can provide the opportunity to enjoy “hip neighborhoods” in Boston and cities without big bucks. It will be interesting to see if the micro-apartments in Boston’s innovation District, which have been criticized for being too expensive, will inspire more affordable alternatives like these single-room occupancy units in Beverly.
That’s if you’re content to rent. If you want to buy, you may still need a rich uncle. That’s why the Real Estate Cafe has begun thinking about how to use crowdfunding to turn our 100% commission rebate into a “Do-it-yourself” Rich Uncle.