What Will Happen When.....?
I have read Robert Kiyosaki's book “Prophecy” about the stock market crash when the baby boomers start to sell their mutual funds in their 401K. Well that got me thinking …..
What is going to happen to the real estate market when the baby boomers start to retire?
Since, a large part of Americans will not have enough money to retire, they will look to downsize or sell their homes to fund their living expenses. When you have 70+ million baby boomer’s selling their homes, there is going to be more sellers than buyers, thus creating a big crash. The higher priced homes will probably be hit the hardest. Japan is going through a similar situation now where their baby boomers are retiring and their real estate market continues to go down.
Hi kmaples.
That is a good question! I have tried to study that exact situation myself, however I have come up empty.
From what I know, this may be a time when our economy BUSTS, or it may be a time that a lot of investors get RICH, by buying houses for extremely low amounts!
BAMZ
[addsig]
Statistics are a wonderful way to get a point across, but they have to be taken for what they are worth. You will always find one person touting one statistic to say teh sky is falling, and another saying that life is only getting better.
When you see stats like 70+million baby boomers selling their homes, just remember,
#1- they aren't all selling them on the same day, week, month or year, it's over time.
#2 - just because these houses are going onto the market, doesn't mean they'll stay empty or won't be needed.
#3 - lot's of stats going the other way. Less than 75% own their own homes. 3.9 Million babies born in US every year. 10 million people in US illegally at any given time.
Although there will always be corrections for artificially inflated prices in certain areas, there is only x acres of land, and they aren't making any more of it. Wealth has historically been based on land and will continue to be so in the future (I guess until we all live on space ships)
Supply and Demand......
If the building rate continutes to be high and there are more houses than needed, then there will be a market adjustment. I would guess that retirement communities will be hit hard, but that the overall efect would be minimal. Knowing that we should buy low, sell high and work with motivated sellers, it sounds like a great opportunity to me!
That's very interesting, but I would not lose sleep over this. Your post made me think about the other factors affecting real estate market. The United States is allowing a lot fewer immigrants and lawful alians to come in. Birth rate is going down steadly. These are just variables that are affecting over all economy. Retiring baby boomers is just another variable to me.
You mentioned what happened in Japan. Reat Estate market is in Japan is something totally different. The people's mentality about real estate is totally different too. Once they buy a house, they will live in the same house forever. When they retire, they will not need to down size. Their houses are already very very small. The only time they will sell their houses are when they finally have to go to retirement commnuities or reluctantly have to live with thier kids.
There have been some great points here, and I think the best point is the fact that if they are selling well someone has to be buying. And if I am going to be in this statistic then I prepare myself to be on the buying end.
Have not read the Kiyosaki book and probably won't.
What did the book say about the baby boomer's position to be on the receiving end of the greatest transfer of wealth in the history of the country.
The Boomer's parents saved all their lives and invested in their legacies. Their houses are paid for, they have no debt, and often large retirement nesteggs. I read somewhere that Americans have over $9 trillion of equity in their homes. What will happen when those parents pass away and the Boomers inherit all that accumulated wealth?
Did the book factor all this into the future scenario?
Well actually a home that I am trying to purchase for investment purposes is a 3 bedroom home owned by a single baby-boomer. Her kids have all grown up and moved to the city. Her husband passed away a few years back. She is going to be looking for a house in the city to be closer to her kids and grandkids. I live near an Air Force base so unless the base closes Real Estate should be in good condition around here. And I think there is still enough population to keep the RE biz going.. not to mention that Retiring Baby Boomers will still need places to live, there may be good cause to construct more "Retirement neighborhoods." I used to live near a Babtist Retirement neighborhood, where they had Duplexes I believe, but they were all owned by a church or something. I could see that they could be especially valuable if they were located near a hospital.
All of us are still going to need a home to live in. Paying a mortgage will still provide a better rate of return that paying rent. When all of those baby boomers loose large portions of their retirement, their home is their nest-egg When they sell it, someone elses grand children will be buying it. I don't see it becoming the norm for three generations of the same family living in a 3br, 2 bath house any time soon. We may have to invest differently, but here will still be plenty of opportunity.
Jeff