It's been one year since that day on the golf course. We were backed up on a par 3 and struck up a conversation with the group of guys ahead of us. When they found out I was a Realtor, the conversation immediately turned to the condition of the housing market.
One of them pointed out that the election was in just a couple of weeks and that the market would surely turn around "after Bush is gone".
"Really? Let me ask you a question," I replied. "Who was the President when you bought your first house?" He paused. He counted backwards on his fingers to get to the year of purchase. "Carter. No, Reagan. No, Carter. Yep. Carter." "Well, if you can't remember who was President, then that certainly didn't play a role in your decision to buy at the time, did it?" Of course not.
Because first-time buyers don't give a hoot who the President is when they're ready for a place of their own. What they do care about is 1) can they make the payment and 2) can they have a dog. In distant third place is whether the washer & dryer stay with the house -- so they can do their laundry whenever they want, like in the middle of the night.
The market is turning around, and it has nothing to do with who is President but everything to do with population. That's because the average age of first-time buyers is 30 years old nationwide, and the generation under 30 is enormous. Every one of them that comes into the market has the potential to generate 3 or even 4 sales, as they purchase a small home and allow that person to trade-up, and yet another to build new construction. This next enormous generation is reaching financial maturity and are about to enter their household formation years whether they realize it or not.
They will get jobs, get married and get pregnant. They will buy cars and infant seats, diapers, school clothes, sports equipment, bicycles, Disney videos and laptops.
Just like we did.
Because we are the Boomers, and we created an economy at a rate consistent with the rate we were born. We came into this world in numbers never seen before. The economy as we know it is measured by the rate at which we did stuff. But then the Boom ended, and births dropped in the 1970's. Thirty-something years later and we are experiencing an economic contraction. Duh.
Yes, our industry will respond as the kids enter their household formation years. But the low births in the 1970's are not going to go away. It happened, and today we have fewer consumers in their 30's than are necessary to sustain what we built -- and the industries which rely on this age segment are feeling the pain. But in a few years there will be fewer consumers in their 40's. Then fewer in their 50's, and on up the ladder. As this missing segment makes its way through the economy, industries which rely heavily on age-specific purchasing are sure to see a drop in business as suddenly as we Realtors saw a drop in first time buyers. Overnight.
But the age-specific lessons of the real estate crash haven't been learned, or shared. Instead of looking at how many people we have in an age group vs. how many people of that age are necessary to sustain a specific industry, we're all looking at who's living in the White House, what's the price of gas and the consumer confidence index. As if first time buyers worry about that stuff.
So go ahead and follow the Boomer trends with one eye. But keep the other eye on the kids under 30. I can't wait to watch the newscasters scratching their heads when financial reports reflect record levels of home sales in units, yet continued oversupply of homes for sale. Because although the kids are going to come in and buy, buy, buy . . . there's an entire Boomer generation who will want to sell, sell, sell. And neither of them will care who's President when it's their time.
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