Wednesday, October 13, 2010

The effect of the Baby BOOM!!!

Over 10 million people ... # of Canadian baby boomers.
Over 76 million people ... # of US baby boomers.

There are over 86 million people between the ages of 45 and 65 living in North America today.  These people are the most powerful force in the purchasing community.  Approximately 1/4 of the population of Canada and United States are baby boomers, a large percentage that any other 20 year grouping. 

Think of some of the booms ...
- American muscle cars in the late 1960s/early 1970s - Ford Mustangs sold  over 400% better than originally predicted.
- Viagra pills ... enough said
- tennis in the late 1970s
- golf in today's market place
- Minivans in the late 1980s/1990s - Chrysler revitalized their business solely on this product
- Baby/Children stores - Toys R Us, Baby Gap, etc

Just to give you some perspective ...
If the baby boom in Canada and the US were a country, it would be the 13th largest country in the world, behind the Philippines and ahead of Vietnam, Ethiopia, Germany, United Kingdom, France and Italy. Almost 2 and 1/4 times larger than the population of Canada.



#1 question all investors should be asking themselves now is ....

Where are Baby Boomers headed next?
Trend #1 - Smaller properties
Studies also show that roughly 70% of baby boomers will be downsizing to an apartment style condominium or bungalow.  Most baby boomers have an interest in moving into the core of the city being walking distance to amenities.  About 3 out of 10 are predicted to move to cottage type properties, smaller communities or stay in their current neighbourhoods.  Assuming two people per dwelling, this would equate to 60 million dwellings need in urban areas in the coming decade or so.

Trend #2 - Warmer climates
Studies show that 58% of retirees want to have a property in a warmer climate (either primary or secondary residence).  Assuming two people per household, that should be 25 million households needed to fulfill the demand.  About 56% of downsizers (Snowbirds) buy on the Eastern Seaboard (Florida, Georgia, Carolinas, etc), which would total  14,000,000 households and the other 44% buy in the SouthWest (Arizona, Nevada, Texas, New Mexico, California) which would be 11,000,000 homes.

Closer to home ...
 In Ottawa, we have approximately 900,000 people housed in 260,000 homes.  Estimates have about 35% of the population falling into the Baby Boom category, which means 315,000 baby boomers in the city of Ottawa.  Assuming two per household, and assuming 1/3 of baby boomers have already downsized, there will be an influx of 75,000 more apartment style condos and bungalows needing to satisfy their needs. 

2 comments:

  1. Could it also be assumed the influx of 75K apartment style condos being occupied by these boomers would leave their prior residences up for sale? Could this possibly lead to an oversupply of homes on the market and maybe even cause a decrease in home prices? Since there are enough assumptions stated as is, to counter what I just stated, I guess it could also be assumed that if this process of moving to the downtown core would take long enough, Gen X/Y could buy these homes but are there enough GEN X/Y's to do so? An Influx of immigration could also help purchase this over supply of babyboomer homes?

    All to say is it likely to assume that there may be an over supply of homes on the market when the boomers move/try to move to the downtown core by selling/trying to sell their homes?

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  2. Very interesting comment, I thought the same thing. I think that the availability of high paying government jobs are going to solve the problems with homes in the suburbs. So in effect, a GenY person is going to take your job and your home in the coming 20 years!

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