Boom, Bust, Echo by Davelle Morrison
Many, many, many years ago, I read David Foot’s book; Boom, Bust & Echo. It took readers on an explanation of the demographics of Canada and essentially explained why certain trends were occurring in the market place, including real estate. All rationales boiled down to age. When we are a certain age, we make certain purchases. When we leave school, buy our first car, our first home, etc., we make purchases during all of these stages of our lives.
What if the things you took part in were the same as all the others in your age group? Therein lies the premise of David Foot’s incredible book. It highlights how the Baby Boomer generation, born between 1946–1964, are the largest generation and how their lifestyle affects Canadian spending habits.
The Millennials were born between 1982–2004. As the years go on, they will eventually surpass the Baby Boomer generation.
How does all of this hold significance to real estate? At certain ages, most people buy a house/condo, purchase their second house/condo, and then as they get older, need to sell their house. It stands to reason that demographics would play a huge part in our real estate market.
We have seen an astounding increase in real estate prices over the past decade. We had a blip in 2008 for 6 months when the stock markets crashed. The market just came to a standstill and didn’t move up or down. We know that all markets are cyclical so we have to ask ourselves; when will the real estate market decline? If only we had a crystal ball…
Based on the demographics and observations of the Boomer generation behaviours, I have started to notice a few trends:
1. Boomers love their homes and don't want to leave them.
2. When struck with the prospect of downsizing their homes to a condo, they can't justify the price they would need to pay for such a small.
3. In order to downsize, most boomers want to remain in their own neighbourhoods.
4. As they age, they are more inclined to renovate their homes. They start to include an extra bathroom and a bedroom on the main floor so they can stay at home.
The net observation is that the older generation isn’t willing to leave their homes as much as people previously speculated they might. The current real estate market is climbing in part due to a severe lack of supply — obviously there are many factors including interest rates — but for the purposes of this article, we’ll limit the observations to supply. So, when will the supply increase is the logical next question.
I believe that the supply will increase when the Baby Boomers actually have to leave their houses due to age restrictions. Most won’t leave their homes until they turn 80 and experience health decline. They’ll need to go to into a home. That puts us at approximately 10 years from now, 2027, when the housing supply should start to improve in Toronto. This is my prediction as to when the next buying opportunity will appear in Toronto. Until then, save your pennies or buy now so you can take full advantage of the price climb.
This article supplied by Guest Blogger Davelle Morrison.