Robert Samuelson, a Washington Post columnist, offers a compelling piece of evidence that the outlook for the financial wellbeing of young people is not as bad as many, probably including them, believe. Unless you're one of those young people yourself, however, you're probably not going to like it.
The development that Samuelson believes is making the future a brighter place for the next gens is the collapse of the housing market. Here is some of his thinking:
"Housing's troubles may have a silver lining. If you're a homeowner, the steep fall in prices is calamitous. But if you're a future buyer, it's a godsend. What we're seeing is a massive wealth transfer from today's older homeowners to tomorrow's younger homeowners. From year-end 2006 to 2010, housing values fell $6.3 trillion, reports the Federal Reserve. Assuming there's no sharp rebound in prices - a good bet - that's $6.3 trillion the young won't pay."
Samuelson cites data compiled by the National Association of Realtors showing that housing is more affordable than at any time since at least 1970 and quotes Lawrence Yun, an association economist, saying that young buyers "will be able to enter the housing market at bargain prices." Samuelson also highlights a reversal of a multi-decade trend of building bigger houses and offers this likely future:
Young people's "homes will be somewhat cheaper and smaller; their operating costs (mainly utilities) will be somewhat lower. The sacrifices in living standards will be barely noticeable, and the savings - housing, after all, represents most families' largest expense - will provide some relief from higher taxes and health costs."
If the housing collapse has the effect of transferring wealth from older people to younger, the old folks shouldn't feel hard done by. As another Samuelson column points out, older people are enjoying their retirement more than is believed by conventional wisdom.
That is due in part to the immense help that they have received from younger wage earners. The high Social Security and Medicare costs that younger generations incur today serve to cover benefits to retirees who have lived far longer than earlier actuarial tables suggested they would.
With the decline in housing prices, oldsters appear to be returning the favor, although it's not that simple. It's mostly the generation in the middle that is suffering from losses in value and, in too many cases, foreclosures. So if young people do benefit from bargain-priced homes for the next decade or so, they should thank their parents, not their grandparents.