Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Be Afraid Baby Boomers have not paid off the Mortgage Yet

America is likely to see a big wave of mortgage foreclosures over the next decade. Data indicates that over half of Baby Boomers (persons born between 1945 and 1965) have not paid off their mortgages yet.

That means many Boomers will enter retirement with a mortgage payment, and more than of them will end up trying to figure out how to buy groceries and pay the mortgage with nothing but Social Security. Another foreclosure crisis driven by Baby Boomers might be just around the corner.

Over half of Baby Boomers born after 1951 are still making mortgage payments even as they approach retirement age, Fannie Mae’s Housing Insights newsletter estimated. To make matters, around half of the oldest Baby Boomers; many of whom are already retired, are still making mortgage payments.

Data Shows Boomers haven’t paid off the Mortgage yet

Here is how Fannie Mae estimates Boomers are doing on mortgage repayment:

  • 58% of the youngest Boomers (those born between 1961 and 1965); or nearly six out of 10, are still making mortgage payments.

  • 8% of Boomers around age 60 (those born between 1956 and 1960) are still making mortgage payments.
  • Over half; 51.8%, of Boomers at or approaching retirement (those born between 1951 and 1956) are still making mortgage payments.
  • Nearly half; 49.4% of retirement-age Boomers (those born between 1945 and 1951) are still making mortgage payments.
  • Nor is just Fannie Mae or Baby Boomers; around 44% of all retirees still have a mortgage, an American Financing survey estimated.

  • To make matters worse, most of those people admitted they may never pay off their mortgages.
  • Around 16.63% of American retirees admitted they will never be able to pay off their mortgages in an American Financing
  • Another 32.31% of retirees admitted it would take more than eight years to pay off their mortgage.

The Boomers are in sorry shape compared to their parents; six out of ten (59.80%) of persons born before 1945 had paid off their mortgages, according to Fannie Mae’s data.

Many Baby Boomers will lose their Homes

Large numbers of retired Baby Boomers will eventually lose their homes to foreclosure because of this situation.

Those people will lose their homes because they have little or nothing saved for retirement but still face a mortgage payment. Bankrate estimated that 20% of Americans are not saving any money, and 47% are not saving enough.

Throw in the pension crisis and the logical conclusion here is that many Boomers will have nothing but Social Security when they quit working. That will be catastrophic because the average Social Security payment for a person who starts collecting at age 70 in 2018 is around $1,320 a month, The Motley Fool calculated.

The average mortgage payment in the United States was around $1,200 a month in 2018, the Motley Fool estimated. That means a retired person might have $120 to live off of after paying the mortgage.

The math does not work and it gets worse for those who take Social Security early. A person who started taking Social Security at age 65 in 2018 would receive just $933 a month. Somebody that starts taking Social Security at age 62 in 2018 will receive just $750 a month.

Baby Boomers’ Dismal Golden Years

Many Baby Boomers will be facing a very dismal time in their golden years.

Large numbers of their will have to work to age 70 or beyond simply to cover their mortgage payments. If health forces these people to quit working they will be forced to sell their homes.

A great many retirement-age Boomers are just one job loss or health crisis away from foreclosure. If property values collapse, many Boomers will end up underwater or walking away from underwater homes. Instead of being of able to use a reverse mortgage to finance retirement, these people will be facing foreclosure and eviction.

More than a few of them will end up facing homelessness in retirement. They will end up living in their recreational vehicles or a government-subsidized apartment.

Many Generation-X and Millennial Americans will get a terrible, life-changing phone call because of this situation. The horrifying message will go something like this:

“Hi this is Dad, Mom and I were wondering if we could stay with you for a while. As you know I can’t work anymore and we’ve been a little behind on the mortgage…”

Since most Americans will not throw their parents out in the street, a great many Baby Boomers will end up spending their golden years in their children’s spare room.

Why Social Security needs to be increased now

There is an obvious step government can take here. Social Security payments for the truly retired and low-income seniors can be increased.

A good start would be to set up a minimum $2,000 a month Social Security payment for any retired senior with an individual income under the poverty level (around $24,000 a year). The income would be paid regardless of an individual’s work history. That would provide a decent working class income for most retired individuals.

This would help all the older women who did not work or took time out from careers to raise families. Also benefiting will be all the self-employed people who will be punished in their golden years because they did not have a “job.” It would provide a safety net Americans can fall back on when the pension system collapses, and help seniors avoid homelessness and poverty.

Be Prepared for the Baby Boomer Mortgage Crisis

Every American needs to be prepared for the Baby-Boomer Mortgage Crisis because there will be some good effects.

A lot of people will pick up interesting bargains in the real estate market because of the crisis. Many Millennials (age 21-36), Generation Xers (36-52) and Generation Z persons (those under 21) will have no trouble finding a cheap home because of it.

There will also be a lot of great bargains at estate auctions, and businesses will have little problem finding older workers to fill jobs. Beyond that many American parents will have no problem finding a babysitter because the grandparents are in the house.

Baby Boomers’ failure to pay off their mortgages can have catastrophic consequences everybody should be aware of. Hopefully, Generation X, Millennials, and Generation Z will learn from their parents’ and grandparents’ mistakes.