I ran across this article today, and it paints a possibly grim picture of the future:
Baby Boomers Could Spur a Housing Bust
Now, I have two responses to this. The first is kind of reassuring – never forget that all real estate markets are local. There’s no way of telling if there’s a glut of Boomer ownership in your area, so there’s also no way of telling if the exit of Boomers from your market will cause stress on your portfolio. It’s an indicator to watch out for, certainly, but nothing to panic about in advance.
The second response is anti-reassuring to say the least. If the above is true, and demographically it certainly seems true, you should make sure it’s impacting your forecasting up and downstream. In addition to softening in the market itself, you’ll want to account for likely increases in property taxes (as the base contracts). I would also think you’d see decreases in rental prices as the excess capacity that can’t be sold moves into a rental status as heirs try to salvage a millstone property. So you’re looking at contraction in your rental rates while your expenses increase in a way you can’t impact. I would think this would also toss the overleveraged landlord out of the market as well, as their businesses sell.
This shouldn’t scare you away from investing, but they’re certainly factors to consider as you’re doing your longterm planning. Remember, though, if you buy right and manage right, you’re better off than the majority and market stresses like these can be opportunities for your business as well as threats to your business.
Toodles,
Dumpling
Dumpling,
I think this article is simply a way for us, if a real estate market slump does come in the near or distant future, to point the fingers to the baby boomers and not to the rest of the population for once again buying houses we can’t afford, buying when we should be renting (in most cases), and giving blame/credit to the normal cycle of things. I think them selling their homes, mixed with an ongoing growing population of people who don’t detest renting, will bode well for investors purchasing homes as rentals and continuing to make a good income from them, while providing decent housing for good people.
That’s a fair point, and they’re certainly not the only generation making poor choices – just the biggest one so far!