I'm a Boomer. So are you.

By
Real Estate Broker/Owner with Susan Rossi, RE/MAX 2000

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.

Comments (4)

Anonymous
Nik'a Mom

Great article.  It's so nice to hear a logical explanation for what's happened over the past couple of years instead of the gloom and doom opinions of the so called "Financial Analysts".   When did the birth rate pick back up?  When can we expect the big upswing?

Sep 14, 2009 12:20 AM
#1
Susan Rossi
Susan Rossi, RE/MAX 2000 - Crete, IL

Births picked back up in 1980 :) They're almost here, which is why the tax credit has been effective. It tapped into this huge generation and encouraged the kids to come in a bit earlier. Get ready, I think we will have another boom that will make the last one look like a joke. But I also think NAR is dangerously underestimating the level of inventory that will be created by the aging Baby Boom. So I think we'll have record NUMBERS of sales, but continued oversupply of inventory. Thanks for commenting!

Sep 14, 2009 12:28 AM
Anonymous
Alan

Very good article Ms. Rossi.  It's apparant that you were able to explain the phenomenon that still has people scratching their heads.  I appreciate you taking the time to share this.

Sep 14, 2009 03:25 AM
#3
Anonymous
Patricia

I love it!!  As if the President has anything to do with consumer confidence and our willingness to invest in ANY market let alone the real estate.   All I need to do is open up my front door and look at how many houses are for sale on my street and how long they've been there...and do the math.  I realize there was a major crunch in the market last year but I have watched two homes list and sell on my very street in the past 4 months.    Nobody ever mentioned the idea that there weren't enough buyer's available...not just active in the market!!!  This information makes good sense.

I am so sick of people trying to make it sound like they know what they are talking about when they blame politics for everything that goes wrong in this country instead of looking at the people making the decisions.   I am curious if you have any information as to how many of these first time buyer's actually purchase existing homes to help move the market along?  I sort of had the feeling that builder's were monopolizing them with glamorizing the idea of owning a brand new home with "affordable" financing.

Pat

Sep 14, 2009 03:35 AM
#4