Counter-trends that could turn the tide?

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carrido_IHB

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I've been lurking for a while on this board and really appreciate the insight of the people here. I sold my condo a few months ago (based on information from this blog and other sources) and I'm convinced it will be a great long-term decision for me.



One thing I'm always on the lookout for is some 'trend out of nowhere' that will make my decision the wrong decision. Here's one I came up with, but I am having trouble understanding the potential impact:



What would happen if people went to multi-generational living situations in a big way? I know this is anecdotal in the extreme, but I have seen some cases of this happening with people in my age group (25-35). The story goes something like this:



1. The parents wanted to downsize, but their equity has taken enough of a hit that they aren't be able to buy something that is even close to the same lifestyle as before. They would have to buy a small house in Palmdale or something like that (waiting for the hate mail from happy Palmdale residents!)

2. The kids want to start having kids, but can't afford a house with enough space. Renting seems like a waste of money to them because that's what they've been told.

3. Kids and parents move in together. Kids get the house they need and parents aren't forced to downsize to a situation they won't be happy with.



I'm not sure how to begin to build a model around something like that. I guess a good place to start would be to ask any RE agents that work in areas where this sort of living arrangement is more common. If you are out there, can any of you speak to the effect on pricing for those localized areas where multi-generational living is more common? Does this tend to prop up prices in these areas?



It's possible/likely that a trend like this would just be a speed bump in terms of the massive de-leveraging that is taking place, but it's probably worth exploring.



Anyone see something else that could stand in the way of 'real-estate down'?
 
I think there are a lot of hypotheticals there - probably too many to address but I'll just go by what pops into my head first. Just a few thoughts...



These days we see families living further and further apart as people go in search of jobs. My in-laws live 3,000 miles away because my spouse had to leave in search of better opportunities and I would say many, if not most, face similar circumstances. These are different times we live in. Not everything is so tight-knit anymore.



I think however many people you have moving back in with their parents is combated by the number of people going their separate ways i.e. divorce. The divorce rate in this country is huge. When you break up you need two households instead of one. I think the number of divorcees probably outweighs the number of basement-dwellers moving in with mom & dad.



Lastly, I think it is a cultural thing. While it may be more common for example in Asian households... I think many people especially from different backgrounds are not accustomed to the idea and would rather rent a tiny apartment over moving in with their in-laws. If they did move-in I'll bet they couldn't wait to get out! That honeymoon period would probably end pretty darn quickly.
 
[quote author="CalGal" date=1221626734]CalGal living with parents or In-Laws = SHOOT ME!</blockquote>


No kidding. I can't even imagine it. Frankly, I'd rather live in my car if push came to shove.
 
SittingInCash, I really can't fathom how you would think such a trend to be supportive of home prices. What you are describing is basically more people per household. If you have more people per house you need fewer houses for a given number of people. That means a contraction of aggregate demand, which would lower, not raise, the equilibrium price.
 
[quote author="bigmoneysalsa" date=1221630609]SittingInCash, I really can't fathom how you would think such a trend to be supportive of home prices. What you are describing is basically more people per household. If you have more people per house you need fewer houses for a given number of people. That means a contraction of aggregate demand, which would lower, not raise, the equilibrium price.</blockquote>


I could be wrong but I'm guessing one of the main points in his example is that inventory could be tightened as the hypothetical retiree parents would not be putting their house up for sale (multiplied by however many such parents exist in OC.) hehe
 
[quote author="SoCal78" date=1221631376][quote author="bigmoneysalsa" date=1221630609]SittingInCash, I really can't fathom how you would think such a trend to be supportive of home prices. What you are describing is basically more people per household. If you have more people per house you need fewer houses for a given number of people. That means a contraction of aggregate demand, which would lower, not raise, the equilibrium price.</blockquote>


I could be wrong but I'm guessing one of the main points in his example is that inventory could be tightened as the hypothetical retiree parents would not be putting their house up for sale (multiplied by however many such parents exist in OC.) hehe</blockquote>


That was the idea. Each time this would happen, a home would be removed from supply. I see the point about this scenario also lowering the pool of buyers, though (assuming those 'potential buyers' were viable to begin with).
 
[quote author="SoCal78" date=1221628158]

Lastly, I think it is a cultural thing. While it may be more common for example in Asian households... I think many people especially from different backgrounds are not accustomed to the idea and would rather rent a tiny apartment over moving in with their in-laws. If they did move-in I'll bet they couldn't wait to get out! That honeymoon period would probably end pretty darn quickly.</blockquote>


Agree that it is a cultural thing. Does anyone know if prices are higher in areas where this sort of living situation is more common?
 
This would be a good thing for both parties as:



a. Grandparents see their kids/grandkids more.

b. Grandkids see Grammy and Grappy more.

c. Mom and Dad get free babysitting.



The problem is that nowadays, many families are no longer intact... so the 25-35 generation's parents are more likely to not be living together. And many parents that are still intact, may not even live near where their kids do, and if they are not retired, there has to be some obstacle of job location.



In addition, most 2x-3x don't want to live with their parents/in-laws even if it saves them money.



I doubt this scenario is a high enough percentage to even slightly impact sales trends.
 
[quote author="SittingInCash" date=1221623999]I know this is anecdotal in the extreme, but I have seen some cases of this happening with people in my age group (25-35). </blockquote>


This just happened with a buddy of mine. Not sure how to model this though..
 
What a great idea!



And yes, it is an Asian / Hispanic thing, no shame in that, what so ever! On top of free child care, the parents get to aggressively save for that down. When the kids are about 3 (2012), they can buy and move back to Irvine, just in time for pre-school! Mom & dad, I'll start packing today...
 
[quote author="roundcorners" date=1221703514]Mom & dad, I'll start packing today...</blockquote>
No... we are enjoying our swinger lifestyle... you moved out... stay out.



Love,



Mom & Dad
 
I don't know about everyone else's parents.... but mine have always maintained that they are not free babysitters and will not be taken advantage of (and we've only asked them to babysit once so it's not even an issue). They really like their freedom and privacy... I don't think they would ever be up for a cohabitating situation. Even back when I first left home my dad said "This is not a revolving door. Once you leave - you don't get to come back." We are also caucasian and I think that's how many parents from our background feel. On the other hand, I grew up in Yorba Linda and had MANY friends who lived with a lot of extended family in huge (and pricey) houses all under one roof.
 
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