Baby Boomers Housing Dilemma?

In Canada there are approximately 10 million baby boomers (born between 1946 and 1965) and they begin turning 65 this year. One of the biggest upcoming decisions that boomers will face, and one that will impact the economy and housing market, will be whether they downsize the family home along with retirement. Financial experts are saying that we can expect today's high house prices to start falling as an over abundance of homes appears on the market.

Boomers are not predictable
But Baby Boomers are not doing exactly what the experts have been predicting. While analysts have been expecting that with retirement age of 65, Canadian Baby Boomers will sell their homes and downsize causing today's high prices to plunge, retirees are opting to remain in their family homes. They are making this decision for a variety of reasons; being Empty Nesters, they are turning the extra rooms in their homes into hobby rooms and exercise areas and they are enjoying having additional room for grandkids and guests.

According to David Foot author of Boom, Bust and Echo and professor emeritus of economics at the University of Toronto, the popular belief that when the kids leave home boomers will downsize, is just not happening. They're expected to hold onto their homes well into their 70s; "We still have about 10 years before the downsizing bulge alters the balance between sellers and buyers in the housing market," says Foot. He also observes that an aging population suggests slower economic growth and we should soon expect a change in the housing market and house prices to start relaxing.

So what does that mean for baby boomers? The longer aging boomers live in their homes the more they potentially stand to lose in waiting until there's an over abundance of houses on the market before selling the family home. David Foot's view of the upcoming housing market trend includes some subtleties in the buyer / seller balance. He says that housing in the suburbs will become more attractive to young people moving from urban condos to larger more family friendly homes.

Possible influences on housing costs
Another condition that can affect housing prices would be inflation and that a 5 or 6 percent increase in the inflation rate will overflow into house prices. A possible conclusion about when baby boomers should sell is that if they are putting financial gain above lifestyle, selling now and avoiding a possible downturn would be the thing to do.

Associate professor at the University of British Columbia - Tsur Somerville, says that in Canada it's too early to say how the housing crisis will play out and that immigration will be a key. Generation Y - the group following the Baby Boomers - have far fewer numbers of potential home buyers to fill the void that will be caused by an over abundance of homes on the market but immigration will help fill that void in buyers.

In 2009 - 2010 new immigrants accounted for nearly 60 percent of population growth in Canada and they will definitely help mitigate a possible real estate crash caused by boomers waiting to sell. Professor Somerville says that the areas of the country that need to worry most about home prices are cities that have a very small rate of immigration combined with young people and retirees relocating.

The question of whether there will be a housing dilemma is a huge question being addressed by analysts and discussed in think tanks among experts across the country. There are many factors that could and will affect the answer to this question in a variety of ways. Stay with me as I continue to study the effects of the decisions of Baby Boomers on our economy.