Arn > “it is going to be harder for our current 20 somethings to maintain the same standard of living as their Boomer parents had”

One thought on this: the Boomers are notorious for their poor financial skills. I would argue that the Boomers lived way beyond the standard of living they could afford and helped to create some (many?) of the problems we are witnessing now (file this under Boomers: no personal accountability). So younger generations may come out of this with a better base in long term wealth and retirement planning, thanks to the always swinging pendulum of a capitalist economy.

I’ve dealt with this topic/challenge most of my career, as living/working in San Diego makes one aware of high home prices, and regular folk.

I’m gonna be writing a post on this very topic. I agree both with Sean and David. Their points are ’stand alone’ in one sense, but can be weaved together, based upon my investment real estate broker experience.

Thanks for acting as catalyst. Much appreciated.

This paragraph from a Pew Report sums up the change nicely:

“In 1970, 40% of all adults in this country lived in a middle income household, with “middle” defined as one where the income falls within 75% to 150% of the median. By 2006, just 35% of adults were in the middle income tier. This small but notable hollowing out of the middle has been accompanied by an increase in the share of adults in both the lower income category and the upper income category. The rise in share has been greater over this time period for the upper group (to 32% in 2006 from 28% in 1970) than for the lower income tier (to 33% in 2006 from 31% in 1970). Looking at these changes by age group shows that the trends have been very different for the youngest and oldest adults. The 65 and older group has moved ahead during the past 36 years; the 18-to-29 year old group has fallen behind. Among the older group, just 45% were in the lower income tier in 2006, down from 58% in 1970. Among the younger group, 39% were lower income in 2006, up from 30% in 1970.”

As you can see there is real generational issues!

I believe the proper metric to look at is net worth not income. New Worth describes how well an individual deals with their financial situation, and also is a key to how much government transfers will be required in the future. The lack of adequate net worth is a real issue, probably can be described as an impending crisis. Maybe I will blog directly on it soon.

If you want to read the full Pew Report, and I suggest it, it can be found here: http://pewsocialtrends.org/pubs/706/middle-class-poll

I agree that there are shifts happening and that any information, especially of a trend nature, can be used for financial gain if one is astute. Your clients appear to be in very good hands.

Arn - as a side note (because this type of sentiment is seen so often and is so incorrect), a few stats from Stephen Rose, an economist and author of the book “Mythonomics: Ten Things You Think You Know About the Economy That Are Wrong”

>”As the middle gets squeezed, the glue that holds our society will disappear”

This is a common theme: “The middle class is shrinking… Oh no” It is true, fewer people today live within incomes that are generally recognized as middle class ($30k - $100k). But the number of people recognized as “the mass affluent,” which is the group one step up from middle class, has doubled since 1979 while the number of people one step below middle class has remain unchanged. So, the entire squeeze of the middle class has been upward. That would seem economically positive to me.

>”the rich get richer”

Another very common theme. Actualy, the US economy hands out wealth much more evenly than you might imagine. Per capita GDP has increased 65% since 1979. If all of that had gone to the richest 10% they would hold twice the wealth that they actually do. Also, demographic changes are in play. Take into account the increase in single-adult households, increased employer payments toward retirement and medical and the middle class income rose 33% during this same period. That is only 2/3 of what they would have gotten if all of the GDP increase had been distributed exactly evenly, but then we don’t live in a socialist state.

Bottom line: the middle class is moving up. The lower class is unchanged but their median income has increased. The mass affluent is a growth group and their income is increasing. As marketers (which is our true profession as real estate agents), we should not bemoan the shrinking of the middle class. Instead we should celebrate the growth of the mass affluent and figure out how to cater to them… which I think brings us back to David’s thesis: notice the trends that are going on and act accordingly.

My visit to your general area earlier this year was eye opening to say the least. It was to Palo Alto. The local RE market was operating with a set of rules all its own. Average market times were almost measured with watches.