Like many of my friends and clients, the Great Recession took its toll on me and my financial wellbeing.  Keeping a small business afloat while sending kids to college and paying for all the many personal highlights a family experiences over nearly a decade cost a lot of money at a time when everyone’s revenue was cut.  The problem for my generation is that the down turn couldn’t have come at a worse time: the middle of our peak earning years.  Those 7 years of top earning power cannot be replaced and the replenishing of personal savings as a result is challenging.  Fortunately for some of us, The Great Recession devastation wasn’t at the end of our peak years and we still have some time to build things back up.  For others it encompassed the final years of peak earning and we are just now seeing how difficult their recovery, or lack thereof will be.

Case in point on a recent listing presentation I met with a couple in their mid to late 60’s, in the process of downsizing.  The Great Recession had hit them hard.  The yard was a lot of maintenance, home they owned was more than they needed and besides it was 2 stories.  As we chatted, I knew their story already: kids gone, they were slowing down and bad knees or a bad back or just age in general was pushing them into a single story home (Search for one story homes here.) Realtors everywhere are seeing this a lot lately as the first Baby Boomers hit 70.  There’s no escaping Father Time.  What I hadn’t anticipated was their lack of equity.  I’d sold them the home nearly 20 years ago for a pittance of what it was worth today, so I hadn’t bothered to look at their loan balance on title.

I often hear people criticize homeowners that pulled their equity via Home Equity Lines of Credit, or refinancing.  “They used their home like an ATM,” people will say.  It is true some people did that.  Loans were easy to get 10 years ago but since these homeowners were making good money at the time, the kind of money one makes at age 55 or 60, paying for a larger loan was no big deal.  Home improvement, weddings, college, bar mitzvah’s, helping the kids to buy their first home, was all made possible by tapping into their home’s equity.  Fast forward ten years and a couple of things have happened.  First, the loans these homeowners took out were based on valuations before the market crash when these homeowners had plenty of equity.  Using some for family events and needs was no big deal.  No doubt the market has recovered but not yet to the level of 2006.  The recovered value allows them to sell, unlike a few years ago when so many homeowners were upside down on the mortgage and unable to sell at all.   But the partial recovery leaves them with very little precious equity to move to the next stage in their life.  Moreover, those loans were made at much higher interest rates.  Many of our older homeowners are no longer able to refinance into a lower rate because they no longer qualify based on their declining income.  Because this is California home of Jumbo mortgages, many homeowners are not eligible to refinance under the Government’s no equity/no income refinance program called H.A.R.P. 2.0, where loan amounts are capped at high balance conforming loan amounts ($603,750 in Ventura County, $625,000 in Los Angeles County.)  These property owners would never consider defaulting and we know how unhelpful the banks have been with loan modification, so they are left with mortgage rates as high as 8% in some cases.  I can’t tell you the feeling of heartache I have when I tell an older homeowner what the value of their home is and I see in their eyes the look of deep sadness.  They are looking to me to give them answers (Need help?  Contact Tim here.)  They will exchange glances.  The plan they had that lead them to call me, up in smoke.  They have a home they can either no longer afford or one that makes them climb a staircase when it’s getting harder and harder to do so.  I had one seller run into serious and unexpected health issues.  This happens.  They were already in a one story house, but had used the equity to help their son buy his first home 10 years ago.  Because the husband could no longer work, they simply couldn’t afford their home any longer and had to sell.  For them the issue became, where do they go with so little equity to buy?  A mobile home perhaps.  In both cases, neither family sought pity, on the contrary, this is a proud generation and they faced their reality with grace and dignity.  “We did what we did for our kids,” they’ll say.

Recently the city of Camarillo was brought a development plan for a 13 acre parcel owned by the Catholic Church.  The land had been part of a seminary that the Church no longer used and they wanted to divest themselves of the burden of owning this property.  A developer was happy to take the land off their hands, provided they could develop it and turn it into homes.  Anticipating the “Not in my back yard” attitude of cities today, they decided they would create a senior housing project.  Their thinking was simple: this is an urgent need and they’ll have to approve.  After a rather short debate, the Camarillo City Council, declined the developers plan, citing traffic concerns.  I guess seniors must still be working and commuting, thus contributing to the traffic.  Either that or their golf cart and walker traffic would slow other cars as they made their way slowly through the crosswalk…

The issues that Baby Boom seniors face: the lack of housing, lack of equity, lack of savings and the inability to re-earn all that was lost in The Great Recession are only now becoming evident.  The Great Recession hit the Baby Boom generation hard but its wake is only now rolling to shore and with it comes debris and devastation that no one had considered.