S/O Timeshares Thread - The Next Big Recession

[Colleen27]

Tax breaks are often followed by an increase in tax revenue. Whether the link is there is always up for debate.

Not in recent history - you have to go back to the elimination of the progressive to the point of punitive top rates of the 50s and 60s to find tax cuts that "paid for themselves" in growth.

I think the point is that student loan debt, coupled with stagnant wages means that younger people are failing to launch. Not because they don't want to, but they can't afford to. I see the difference between those whose parents were able to pay for college and those who have to pay back their student loans. The timetable for things like home ownership and childbearing are noticeably different.

I'm just not sure how that could translate into the kind of crisis we saw when the housing bubble burst. It is a personal crisis for a lot of families struggling with how to make multi-generational living work and reconciling their expectations with their reality, and it is a long-term drag on economic growth, but it doesn't seem like something that is going to "burst" catastrophically. It is just going to keep us mired in 2-3% GDP growth instead of seeing the more robust numbers that should have followed the huge Millennial generation coming of age. If there's a crisis to be found in that situation, it will be a slow moving one that really hits when the Millennials start retiring after a career of loan payments limiting/eliminating their ability to save, especially since by that point social security will long since have faded away.

 

[Gumbo4x4]

Not in recent history - you have to go back to the elimination of the progressive to the point of punitive top rates of the 50s and 60s to find tax cuts that "paid for themselves" in growth.



I'm just not sure how that could translate into the kind of crisis we saw when the housing bubble burst. It is a personal crisis for a lot of families struggling with how to make multi-generational living work and reconciling their expectations with their reality, and it is a long-term drag on economic growth, but it doesn't seem like something that is going to "burst" catastrophically. It is just going to keep us mired in 2-3% GDP growth instead of seeing the more robust numbers that should have followed the huge Millennial generation coming of age. If there's a crisis to be found in that situation, it will be a slow moving one that really hits when the Millennials start retiring after a career of loan payments limiting/eliminating their ability to save, especially since by that point social security will long since have faded away.

Revenue increased after cuts in 2003.

 

[barkley]

According to the Washington Post article I read today, student loan debt may be the next “bubble”. If you take student loan debt out of the equation, the rest of our consumer debt is still below 2007 levels.
https://www.washingtonpost.com/busi...youll-lose-your-house/?utm_term=.c1e0856813f8

interesting article.

i'm in agreement with the concept. i see students/parents being sold on student loans in the same manner many home buyers were sold on homes/loans they couldn't afford-the concept that what they are financing is an assert that ALWAYS goes up in value and that they've got plenty of time to grow their income before the high payments start up (we had LOTS of neighbors who overbought with those zero down/interest only home loans when their income didn't pan out to meet the payments down the line-if they were lucky enough to still have income).

this subject is timely for me b/c dd just graduated in june so i've spent the last few days researching her student loans and options. i can FULLY understand why when a grad can have their student debt broken into a dozen or more individual loans, all with different interest rates and different minimum payments they/their parents being tempted to consolidate it all into one loan, but with the amount many students are graduating with ($39,500 for the class of 2017 on average according to the stats-THANK GOD dd's is a fraction of that) ALLOT of parents who co-sign are putting their financial security at risk because if the kid can't or won't make the payments it's going to be the parents who are on the hook for that debt. far too many seem to have forgotten the housing bubble burst and with improved home values in most regions view/utilize their perceived home equity as their primary savings/rainy day/emergency fund. even if an economic downturn doesn't initially impact home values decreased income + paying your kid's student debt on top of your own expenses means what i suspect will be unpaid mortgages and foreclosures (i think if given the choice of either tanking your own credit rating vs tanking your own AND your kid's-most parents will take the bullet on themselves individually and pay the student loans).

 

[DLgal]

There will definitely be a major recession, and soon (within the next couple years).

One major indicator has been home sales in typically hot markets like Southern CA. Home sales have fallen the last couple quarters and the experts say that this may be a huge warning sign for the rest of the country as a whole. When the hot real estate markets start stagnating, it's a bad sign. Of course, it is just one indicator, but it has held up as an accurate predictor for the past several recessions.

Also, without getting "political", certain foreign trade decisions of late are going to have VERY dire consequences here, and soon. It's not a good situation at all. And that's all I will say about that.

 

[adelaster]

.

 

[Christine]

The way things "feel" right now remind me a bit of the lead-up to 2008. I live in a bustling area and home prices are through the roof in some areas. I also witness a lot of consume spending. It all makes our local economy fabulous but the housing part makes me extremely nervous. I also feel that a recession is coming. I'll be okay because I've been in my home for 24 years and I have no debt. I am only worried about my 401K. I lost a lot in 2008. While my 401K has been performing well for many years, lost money is like lost sleep, you never really get it back. Sure it increases as the market gets better but money lost is gone forever. I could withstand that then. I'm about 8 years from retirement so not wanting to see it all drained at this point.

 

[DLgal]

The way things "feel" right now remind me a bit of the lead-up to 2008. I live in a bustling area and home prices are through the roof in some areas. I also witness a lot of consume spending. It all makes our local economy fabulous but the housing part makes me extremely nervous. I also feel that a recession is coming. I'll be okay because I've been in my home for 24 years and I have no debt. I am only worried about my 401K. I lost a lot in 2008. While my 401K has been performing well for many years, lost money is like lost sleep, you never really get it back. Sure it increases as the market gets better but money lost is gone forever. I could withstand that then. I'm about 8 years from retirement so not wanting to see it all drained at this point.

If the markets start to go south, move your money into low risk investments to ride it out. This is the mistake my dad made in 2008. He was 2 years from retirement with ALL of his 401K invested in stocks. He lost almost all of it, and ended up working an additional 5 years like crazy to build it back up. Get ahead of it and sell those stocks...in fact, at this point, you should have a large amount of your money in bonds or other lower earning, but secure investments.

 

[barkley]

There will definitely be a major recession, and soon (within the next couple years).

One major indicator has been home sales in typically hot markets like Southern CA. Home sales have fallen the last couple quarters and the experts say that this may be a huge warning sign for the rest of the country as a whole. When the hot real estate markets start stagnating, it's a bad sign. Of course, it is just one indicator, but it has held up as an accurate predictor for the past several recessions.

Also, without getting "political", certain foreign trade decisions of late are going to have VERY dire consequences here, and soon. It's not a good situation at all. And that's all I will say about that.

is the housing situation at all related to lack of housing? i ask b/c where we lived in california when the bubble burst housing construction STOPPED, and even when the economy improved it was like between a lack of skilled labor and other housing demands (rebuilding existing from fires, earthquake damage...) it never caught up with demand which drove existing values up. where we live now there's a tremendous demand for housing but a massive shortage. home prices have gone up uncharacteristically higher (normally behind the big surges/declines other regions experience) and rentals are largely unavailable (we have a large population of 'nontraditional homeless'-people/families with GOOD incomes who have to couch surf b/c there's NOTHING available to rent). the demand outweighs the supply.

it's only going to get worse when amazon opens the new shipment center-1500 new jobs will bring allot more people in but there's no housing to support it.

 

[mnrose]

I've been skeptical of this market for awhile now. We are due for a pretty big correction. I moved more than 1/2 of my 401K to the "side" in secure investments. That's what I "need" to survive. The rest, I'm letting ride. It will likely face a sizeable correction, BUT, I also don't "need" that money for 15+ years. So, it will have time to correct in the other direction. I did sell a house this year, because I felt like it was an opportune time. Not sure how much more "upward" momentum there is in the real estate market. I think the fact that millennials cannot buy because of overwhelming student debt (as a whole) is going to have a "not good" affect on housing prices. We need new buyers, and the millennials will be much slower to become those buyers, if at all.

 

[mnrose]

And, at the moment, tax collections are WAY down, resulting in a substantial increase in borrowing. There is no evidence at all, so far, that the tax cut will increase tax revenue. None. As it is, the US is set to borrow nearly a trillion dollars THIS YEAR alone, an 84% increase over last year. Can't be good.

 

[Christine]

If the markets start to go south, move your money into low risk investments to ride it out. This is the mistake my dad made in 2008. He was 2 years from retirement with ALL of his 401K invested in stocks. He lost almost all of it, and ended up working an additional 5 years like crazy to build it back up. Get ahead of it and sell those stocks...in fact, at this point, you should have a large amount of your money in bonds or other lower earning, but secure investments.

I've got half in secure funds, but I *need* my money to grow. Savings, 401Ks, and SS just are not enough. I've been saving since my 20s and aggressively investing in my 401K but it never seems like it will be enough. They way to increase, of course, is stocks so I'm still trying to benefit off of that but I'm trying to watch closely so I can pull it out when I think it starts to slide. Like others, I feel like we've got another 18-24 months left but I think we'll start seeing cracks around then. I hope I'm wrong.

 

[gemini2727]

It is incredible the cost of college today, and for a questionable return at that. Something needs to change.

We've been saving forever for our kids in our state college savings program, and so far my two oldest are enrolled in our state school, so it's relatively affordable, but both have grad school in their futures, so there's that.

There has to be some tipping point with how much a college education will cost. Having just gone through the college search twice, the tuition for so many schools is beyond ridiculous. Paired with the fact that a college degree is no longer a guarantee of an adequate salary for today's cost of living like it used to be, it's crazy that they charge so much.

But how it will change, I don't know. As long as people keep paying, there's no incentive to lower costs.

 

[Mrs. Ciz]

It is incredible the cost of college today, and for a questionable return at that. Something needs to change.

We've been saving forever for our kids in our state college savings program, and so far my two oldest are enrolled in our state school, so it's relatively affordable, but both have grad school in their futures, so there's that.

There has to be some tipping point with how much a college education will cost. Having just gone through the college search twice, the tuition for so many schools is beyond ridiculous. Paired with the fact that a college degree is no longer a guarantee of an adequate salary for today's cost of living like it used to be, it's crazy that they charge so much.

But how it will change, I don't know. As long as people keep paying, there's no incentive to lower costs.

I agree with you about college costs! We started buying into our state's prepaid tuition program when our kids were 4 and 6 years old. I wanted to do it earlier, but DH was convinced we didn't have the money to do it. We waited about 3 years, and the cost for 4 years of prepaid state tuition doubled in that time. I showed that to DH, and he agreed we couldn't afford NOT to do it. We scraped together every tax refund, gift money, a little inheritance money and monthly income to buy 4 years for each kid. Some we paid for outright; some we paid monthly until they were 18. Having their tuition covered has been a God send. I went from part time to full time at my job to cover room, board and books. During his 3rd and 4th years, DS was awarded $20,000 in scholarship money, which also helped. We are going to be able to get 2 kids through 4 years at really great state schools with no student loans. DS's tuition, room, board, and books will be $30,000 at his in state school this year (this includes a $5000 tuition differential for his Finance program). DD's total is about $6,000 less due to her school's lower tuition and lack of tuition differential. It is a fortune! However, DS already has a job offer going into his senior year for a Financial Analyst position with a Fortune 200 company at a starting salary package of $69,000 ($63,000 plus a $6000 signing bonus). So I'd say the struggle to pay for college was worth it!

 

[Gumbo4x4]

And, at the moment, tax collections are WAY down, resulting in a substantial increase in borrowing. There is no evidence at all, so far, that the tax cut will increase tax revenue. None. As it is, the US is set to borrow nearly a trillion dollars THIS YEAR alone, an 84% increase over last year. Can't be good.

Tax revenue is UP vs last year. Of course spending is up MORE. So yes, there is a deficit increase. But, it’s not due to reduced revenue.

 

[barkley]

We need new buyers, and the millennials will be much slower to become those buyers, if at all.

i'm wondering if this issue will cause changes in later age lifestyle planning for us older than millennial home owners. seems like for decades the trend has been for empty-nesters eyeing retirement to downsize into smaller homes or opt for adult communities, selling off the family home to fund it or to liquidate it so their adult kids aren't left to deal with a post death sale. these adult kids have largely been homeowners themselves so unlike 'back in the day' when home ownership was frequently b/c homes passed from from generation to generation, retaining a larger family friendly home hasn't been beneficial. NOW i'm seeing multi generational households making a comeback, and some of my retiree friends are opting to do renovations to their homes not with their own needs in mind but to suit the needs of their adult children/grand kids as a means to enable them to ultimately own the home-i know a few that have gotten tiny homes or put in mother-in-law suites to move into to facilitate their kids/grandkids taking over the family home.

 

[Buckeye218]

Tax revenue is UP vs last year. Of course spending is up MORE. So yes, there is a deficit increase. But, it’s not due to reduced revenue.

Agreed. The confirmation bias in other posts in this thread that ignores the obvious betrays any objectivity.

 

[mnrose]

Tax revenue is UP vs last year. Of course spending is up MORE. So yes, there is a deficit increase. But, it’s not due to reduced revenue.

Ok then. You make my point. This is why we have to borrow at nearly twice the rate as last year. Something has to give or our children's future is very, very bleak. I guess when I see my expenses are rising, I generally don't cut my hours at work to make the gap between income and expenses even larger. Which is what we've done.

 

[chicagoshannon]

We JUST got out of the last recession like a year and a half ago or so, so I don't think they'll be another for a few years.

 

[Colleen27]

Tax revenue is UP vs last year. Of course spending is up MORE. So yes, there is a deficit increase. But, it’s not due to reduced revenue.

Comparisons of the effects of tax cuts aren't strictly year-over-year, though. If the economy is growing, tax revenues will rise. Period. The comparison is whether they can generate enough economic growth to offset the revenue lost by the cuts - in other words, is the total revenue higher or lower than it would be at the same point in time if the cuts hadn't happened. Figuring that out isn't an exact science, but by most non-partisan economic modeling recent tax cuts fail that test.

And when we're cutting in good times, we water down both the viability and the impact of cuts as a tool for stimulating growth when the economy hits a down cycle.

 

[Colleen27]

We JUST got out of the last recession like a year and a half ago or so, so I don't think they'll be another for a few years.

The recession officially ended late in 2009. The recovery has been weak and uneven, so it felt like longer in a lot of places, but it has been more than a decade since the start of the last recession which is one of the reasons some feel like we're "due" for the next one.