Demographics -Baby Boomers

[mcgregok]

For over 15 (1990-2005) years I have developed my Real Estate business plan based on demographics. My ads use to read "Cheaper than Rent" looking for the first time buyers. My plan was to retire at 55 in 2005 since the demographic I was following would be nearing an end (baby boomers) and the market would mostly likely start to trail off. So I sold my business and did`nt renew my brokers licence in Sept. 2005 sold my main residence and went into to cash plus a handfull of rental properties expecting a downturn in the market based on demographics. THE PROBLEM - we got a downturn but the wrong one. Instead of demographics it was a subprime crises. The demographics downturn was not supose to come until 2010. So, the question on my mind is does the subprime crises wipe out the demographics crises slated for 2010 (peak spending). Real estate is still not much of a buy right now but the dividends on stocks are very good. I can`t see it getting much better than it is (10-15%). Since the demographic trend line served me so well in the past I hate to abandon it now.Your thoughts!!

 

[mortgageman]

My wife attended a presentation by David Foote the other day. (He wrote Boom Bust and Echo.) The big message she took away as it pertained to real estate was that kids of boomers, the echo cohort, are about to burst into the real estate market over the next three to five years and they`re going to have a big appetite for houses. Presumably they too will also start looking at investing - albeit small amounts since they are at the start of their careers - in the stock market.

 

[kabuku]

great topic McGregok,
I have read both Foote and H.S.Dents` books and love this topic.
I think the subprime crisis will not negate the effects of the ending of the peak spending of the boomers. It will just compound it and cause an early onset of it and create one longer drawn out reccession(with some bounces along the way).
Regarding the echo generation, I don`t have any info as up to date as a recent seminar by foote.
However, my impression was that the echo gen wouldn`t start buying houses until the majority hit about 30 and then it will be starter homes/condos.
While the desire to start a household will naturally occur in the echo gen, the fact that they are looking for careers at a bad time and likely the first to be laid off if they already have one will definitely hamper their ability to purchase a home in the next. So, this environment could hold them back a few years but then they will arrive with a pent up demand. I wouuld love to write more but I have to go and unclog the bathroom sink (three girls with long hair).
Regards, Brian anderson

 

[selansa]

Interesting view from HS DENT reguarding 2009-2010

http://www.youtube.com/watch?v=r9A_bIEfM1g&NR=1

 

[JoefromTO]

The video is very interesting and at the same time quit alarming. Now, I know from hearing Don speak that he suggests that there will be a time to sell. So my question is to Don or anyone else who can comment...what are the fundamentals saying? When will it be the right time to sell?

Are we headed for a depression?

 

[invst4profit]

I believe we will see a depression although everyone will avoid calling it that.
I believe the next few years (5) will be very exciting.
There is the potential to make and break millionaires.
Very exciting times.
Plenty of excellent deals if positioned properly to come out the other side with a new millionaire class.
Landlords holding negative cash flow properties may be forced to sell at fire sale prices.

 

[JoefromTO]

So its safe to say that cash will be king...which suggests selling properties to liquidate..?

 

[TommyK]

QUOTE (JoefromTO @ Nov 27 2008, 12:52 PM) So its safe to say that cash will be king...which suggests selling properties to liquidate..?Cash is nice. But cash sitting in a bank account is a waste of time. The money is not moving fast enough.

The best way is to generate cash flow with much higher interest than 2-3% that banks are offering.

And save some cash on the side for emergency. (6-10 months of monthly expenses put away is nice throughout recession)



I am suspecting that the US government might delay the mandatory 410K pension funds withdrawal to balance the financial market. The market has already taken a big turn before 2010 (when the first wave of retirees are supposed to start to withdraw from their pension funds); if the market hasn`t rebounded by 2010 and plus mandatory withdrawal from pension funds, then what is going to happen with the equity market?

One possible solution is this (I am no economist, but this is my take on this subject).
*Almost all employers, luckily, have switched from "defined-benefits" to "defined-contributions" pension plan. Not only are the employers NOT responsible for performance of your DC pension funds, but employees are left without many choices but invest in company sponsored mutual funds. Since pension funds are locked in until retirement age, the fresh contribution from the eco generations will continue to support the equity market, just when baby boomers continue to withdraw from the market. However, the unfortunate consequence for the eco-generation is that those who rely on company pension funds may be left without much to retire with if the younger generations cannot further support the market!!

This is one of the reasons why I am investing in my own retirement. I want to create sufficient cash flow so that I don`t have to rely on company pension funds which a) I can`t access it until age of 65 b) I have no control over since it is invested in mutual funds. I want to be able to control and be responsible for my own financial future.

Side Note:
Big, old companies (ie. GM) are loaded with "defined-benefits" pension plans that gaurantee a certain amount of retirement funds. Luckily, or unluckily, we have a socialist government that will bail out the big companies to prevent catastrophic loss.

Interesting!