Wednesday, November 16, 2005

The Next Great Housing Boom

The baby boom generation represents 78 million people born between 1946 and 1964, or about 29% of the population of the USA. By 2030 there will be twice as many retired people as there are today.

The median net worth among boomers increased from $36,000 in 1989 to more than $107,000 in 2001. Counting home equity, net worth exploded from $140,000 to $400,000 for the period.

In the year 2011, just 6 years away, the first baby boomers will began retirement. Early retirement at the age of 60 starts the migration in just months.

With the recent spike in home equities you can expect a high percent of those boomers retiring early to tap that home equity.

Three things will happen.

1) A stampede to tap bloated equity will drive boomers out of suburbia’s high price market and into a lower price rural setting. After all if you remove the need to be employed. You can buy a beautiful house on the beach, lake, mountain, sunshine, and so on for pennies on the dollar.

2) Real estate in the bloated suburban areas will crash in price. Real estate in the rural low price settings will rise in value.

3) Home builders will continue making money selling to the great migration of baby boomers tomorrow. Just as they made money off their migration into the burbs.

If you live in a trendy high price neighbor, I’d consider any other options you have. And whatever you do. Do not listen to the clowns who are attempting to sound smart by telling you to short the home builders.

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