Migrating America From Necessity Not Choice
There's a new trend a foot. If you've read my work you know I manage money for my parents, and as part of that service I always like to keep them abreast of what I see coming in the future, because it impacts how and where we put their money to work.
Roughly 8-9 years ago, my last grand parent passed away, and my dad inherited a large house with his 2 siblings back in a remote part of Montana where he grew up. At that time, he was 53-54 and retirement was the last thing on his mind and he never thought he would end up back home.
At that time, I made the comment to him, "that he should buy his brother and sister out and retain that house for retirement". He looked at me like I was crazy. So, we had a rather lengthy conversation back then about why:
I said, "when you choose to retire from California in several years, you and all your friends are not going to retire at the same time and pick up and go to the same place, and you may want a home where you still have family and people you know, even if it's a place you only use a few months out of the year".
Secondly, I said, "you may want to own a house that's relatively inexpensive incase we go through a deflationary period as I expect to be the case when you're in your retirement years, and a 50-70% reduction in your $500,000 house is painful, but a 50-70% reduction in a $60,000 house is nothing on a relative basis.
We also discussed the relatively lower cost structure of living in states that
are much cheaper, and as a retirement home it allows them to live off their social security checks and pension checks, which allows their net worth to last much longer and protect them financially, which allows them to enjoy retirement with out having a MacJob. Simple risk management.
Yes, even as far back as 8-9 years ago, I've been planning the financial side of life for their retirement, and so far every decision has been a huge winner for them with no financial set backs along the way. I also give my parents a great deal of credit for making tough choices and smart money decisions.
One of the things I told my parents way back then, which still rings very true today, is when the baby boomer generation retires from California, Washington, New York, Boston, Washington D.C., etc. they will realize a few things:
First, the bulk of them didn't save enough money to retire where they have lived and worked for the past few decades, and the vast majority will choose to leave for financial reasons upon retirement.
Second, if they try to stay put they will go through asset burn just like a start up company on venture capital money. They will be forced to move later in life, but will eventually leave and have no assets.
Their friends will have to up and move too, so their life socially will change dramatically. One of the things I saw way back when were boomers returning to their home states in retirement to be around people they knew especially if that area is cheaper to live for retirement.
And lastly, when we go into deflation, families will be living together out of sheer necessarily of survival. The lack of a real job market and full time employment will force the children of retirees to move back home, or maybe the children will have to support those boomers who are financially distressed.
Recently, I've noticed this trend catching traction. It's amazing what financial pressures will force people to do in this world.
I have a friend, whose parents moved back to Phoenix, AZ. for retirement. Recently this general contractor friend went out of business in CA, and it wasn't long after that he and his wife and kids moved to Phoenix, AZ. His brother, who had also owned a business in Southern California, experienced his own business failure, and he too moved to Phoenix, AZ.
I have a friend that grew up on the same street as me in California in the 70s and 80s, and his parents retired back to their home state of Kentucky several years ago, it's much cheaper than CA. Recently, one of their sons has decided to move back to Kentucky (on their land) because he cannot find work in CA.
When my parents moved back to that small town in Montana last summer, there were a couple other people they new from growing up, that also retired back to that same small town around the same time. My parents couldn't wait to call me and tell me that others had made the same life decisions. Just like I said would happen, and the trend became real for them.
I have a cousin in Montana who is hiring people from Seattle because they can't find work in the major metropolitan area, and these people have decided to live in a remote part of the country for a pay check.
My parents live in a town of less than 200 people and recently, a minister from Los Angeles bought the house across the street for retirement. This is very interesting because the town they live in, is as remote a place in this country as there is, and there aren't many people who've even been through this small town, and this minister chose to live their not because he's from there (he's not) but because you can buy a 4 bedroom house for $75,000 and live off social security in retirement if you have no mortgage.
The most interesting data point I've heard recently, is a young woman working as a waitress in my home town in California. She is putting off moving away from home for college to help cover the bills at home for her parents, who are struggling to make their mortgage payment. She's willing to put off her dreams to help mom and dad, and she feels she's going to pay rent anywhere, and it might as well be to help her parents and live at home.
As the age of frugality and the deflationary spiral gain momentum at the same time the boomers hit retirement in mass during the next few years, we will see an acceleration of these trends. There are simply too many places in this country where you can buy a house for less than $100,000, or even $50,000. There are places in this country where you can buy a house for $15-25K.
They will not be living in some high rise condo, or some ocean front beach home, but for the majority of boomers who realize they just don't have enough money to live another 20 years, they ultimately will chose to live where it's cheap, and possibly that social security check will work for them. It will force people to leave the high cost of living states or metropolitan areas for more remote parts of Middle America. This new trend is born from of the age of frugality.
The other part of this trend that will follow is their children to a lesser degree will migrate with them out of necessity. Yes, as the age of frugality and deflation set in, the population will experience an increasing trend of children living with their parents. My co-worker is 67, and his children 27 and 23 both live with him as finding work, good paying work in an expensive state like California has become challenging.
At its core, this trend will not bode well for the higher cost areas of America. The migration of people will create poor economic trends for areas like California and New York. And families living together will also be a negative on real estate values, as less demand will be the norm as we huddle together in our caves during the age of frugality.
Hope all is well