“Crash Pads” in Orange County?

An Orange County investment adviser named Thomas C. Scott says he has spotted a new trend:  cash-strapped retirement-age Baby Boomers moving in with others to save money.

Scott, CEO of Scott Wealth Management and author of the forthcoming “Fasten Your Financial Seatbelt,” says that at the epicenter of the housing collapse, Orange County, “I’m hearing a pattern of stories about people caught short with maxed-out mortgages, big houses that won’t sell, and eroding incomes who are throwing in the towel and sharing homes with others.”

These Boomers counted on home equity to fund their retirements.  But too many refinancings and too much risk-taking have wiped many people out.

Boomers are getting squeezed from both ends, he says. “They loaded up on mortgage debt during the good times, and calculated their retirement assets based on inflated home prices. Now all that paper wealth is gone, they’re stuck with white elephants, and the end of their peak earning years is in sight.”

Scott says the housing bust could be lengthy, and painful. “The collapse of the 1980s took seven years to work itself out. In the next seven years, some 30 million boomers will reach retirement, many unprepared.”

Seven years may seem like a long time, but it’s a mere blip compared to the prediction one expert came out with this week. Jeffrey Gundlach, chief investment officer at Los Angeles-based mutual-fund company TCW Group Inc., said in a conference call that the housing slump is getting worse.

Gundlach based his assessment on a belief that housing prices still face several more years of decline, a protracted slump, he said, not seen since the Great Depression. Moreover, Gundlach said it’s possible that home prices could be sluggish until 2022.

“If it’s like the Depression experience — and it sure is shaping up that way — it could take several years. Maybe we won’t see a bottom in home prices until 2014,” he said.

There are worse things than sharing a house with someone in Orange County, but that’s not the way anyone envisions their retirement.  If you’re not of retirement age, take a lesson from your elders and learn how to save.  Pay off your debt as soon as possible and start saving every spare cent you have.  Live frugally and use credit sparingly and preferably not at all.  Educate yourself about personal finance. And if you buy a house, make sure it’s one you can afford:  Experts say it should cost no more than three times your annual income.

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