House price deflation and its effect on the soon to be retirees

by 20 May 2011
Despite numerous efforts by the Federal Reserve and the policymakers, US economy has still not been able to fully recover from the financial meltdown. It is still staggering under the immense pressure of debt and each and every market has been suffering since the recession. The growth of job had been stalled too and till now has not been able to recover fully. Another problem now faced by the US government is the home price deflation. This deflation is going to create a retirement problem amongst the people and more so for the baby boomers. Home price deflation and retirement problem The main problem with the soon to be retirees (the baby boomers) is there spending habits. As per reports most of them had not been able to save much for their retirement and only 11% amongst the baby boomers say that they will be able to live their retired life comfortably enough. Most of the baby boomers are getting nervous about their retirement and most are even planning to continue working till they are able to amass more money for their retirement. Another condition which can be related to these soon to be retirees is the house price deflation. According to reports, though the real estate market has been showing some signs of recovery in the last two or three months of 2010, the future of the real estate market is still uncertain. In addition, the reports also show that the home prices have been lowering since four years and it went down for 53rd month in a row. Thus, if any of the retirees have their money invested in the real estate market, they won?t be able to get much money out of that investment if they retire now. In addition, if they had invested money in real estate bonds, they may not be able to get much money out of that too. This is true not only for the baby boomers but also for any other people who are planning for their retirement much ahead of time. They too will be facing the same problems if they have invested their money in the real estate market and the real estate binds. Not only this, even if any person is thinking of selling if his home and fix that money for retirement, he won?t be able to get good price for his house. Due to the home price deflation, the homes won?t sell at high costs and it won?t be that much worth to sell a home for much less a price than what it would have sold for in normal times. Thus, the people who would like to fix their money to earn a regular income during their retirement won?t be able to save much. But the effect of home price deflation will be more on the baby boomers as they don?t have that much time to sell off their homes later. As the real estate market is going through a deflation now, the people who are still young and fresh into their job can push back their real estate investment plans. Moreover, in case of deflation, stocks do not perform well and so the retires won?t be able to make much money out of stock investment. Thus, you can see that the home price deflation is going to affect the retirees or rather the soon to be retires a lot. Though it is true that deflation is good, still the recent situation in house price deflation proves that too much of anything is not good for the market and the people.

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