From a small northwestern observatory…

In an on-line forum, I was asked recently, “In the USA, how will the aging of the “baby boom” generation affect the future of the housing market.”  My answer was as follows:

Well, there’s an old joke in economics — “How did the French revolution affect world trade?” Answer: It’s too early to tell.

Without question, the baby boomers spent a LOT of money on bigger houses, more vacation homes, and lots of other conspicuous consumption toys (boats, airplanes, etc.). It is becoming clear that the subsequent generations do not have the same taste in housing. This is going to mean some radical shifts in the nature of home ownership. Conversely, the boomers are living a lot longer than prior generations, and living independently longer. This means that the aggregate demand for housing is a function both of the size and the shape of the demographic “baby boom” bubble.

Consider that the boomers in the USA are often referred to as the “pig in a python” generation. The birth rate in the USA took off like a rocket about 9 months and 15 minutes after the end of world war II. (Think about it). The birth rate collapsed, more or less, about 9 months and 15 minutes after the introduction of the birth control pill (not exactly, but the analogy is useful). As such, this pig-in-a-python demographic is moving thru the economy, and refuses to get old and die. (I write this as someone born at the absolute crest of that wave.)

Note:  Baby Boom Generation shown in red.

The future implications for housing, housing demand, and the mix of housing demanded by the market, will be dramatic. However, we don’t yet know all the details and shape of that demand, and may not know for some years to come.