At a recent dinner party with a group of fellow boomers, the conversation turned to our homes. Most of us live in relatively large ones on big lots, with all the attendant headaches.
Our yard is graced with a dozen towering cedars that packed quite an appeal when we first saw them. They're still beautiful, but also a royal pain. Each spring, I'm forced onto the roof to scrape off the moss they generate. The shedding they do in the fall fills dozens of large refuse bags over multiple weekends.
Won't it be nice, we all agreed, when we don't have to worry about such things? But then we began wondering who's going to buy our homes.
It's a question that Dowell Myers of the University of Southern California has pondered, too. He is among a number of urban planners and demographers predicting another housing crash, this one caused by the massive sell-off by boomers wanting to downsize.
In a 2008 paper co-written with Sung Ho Ryu, Prof. Myers said communities in the United States face a historic tipping point. The ratio of seniors to working-age residents is expected to grow by roughly 30 per cent in each of the next two decades, the pair calculated.
The first wave of baby boomers reach 65 this year. The last of this generation is scheduled to breach that threshold in 2029. We all know about the demographic monster the boomers represent - a generation that far exceeds, size-wise, anything coming up behind it. Those wanting to enter the market in the coming years may not have the money to buy single-family detached homes, either. Thus the dilemma: Who will boomers sell to when they're ready to move into some swank condo downtown or on a golf course somewhere?
This could actually be good news for young people. An oversupply of homes generally means prices fall. But as home values decline, so will home equity, diminishing retirement savings in the process. Home equity is the single largest component of net wealth for most people.
Today, Prof. Myers is only slightly less fatalistic about the impending housing doom. He says on the phone from California that the subprime mortgage crisis helped let some air out of the bubble that he expects to burst when the boomer sell-off begins. "The generational bubble is less cataclysmic than it might have been, and that's a good thing."
He's anticipating another recession in the latter half of this decade, and that's when the crisis he's predicting will reveal itself. "Recoveries are usually fuelled by people who postponed buying a home who are now surging into the market. I just don't see there being enough buyers for all those selling. I think this is going to be bad for house prices, public finance and global treasuries."
Tsur Somerville, an associate professor at the University of British Columbia's Centre for Urban Economics and Real Estate, isn't as pessimistic as Prof. Myers. "I know it's one of those theories where the numbers add up and the underlying fundamentals are correct, but I think in Canada, at least, it's too early to say how it's going to play out. I think immigration is the key."
But with much smaller numbers of Gen Yers coming through, it will take significant numbers of new immigrants to fill the void if the ratio of seniors to working-age residents approaches anything near 60-plus per cent in the next two decades. In 2009-10, new immigrants accounted for almost 60 per cent of population growth in Canada, so they could certainly help mitigate any potential real-estate crash caused by a prolonged sell-off by my generation.
"The places that need to worry are those cities with an aging profile that don't have big net immigration numbers and are seeing their young move to other places," said Prof. Somerville. "I think there are some centres that fit that description that maybe should be worried. But there's lots of ways this could play out yet."
Either way, I'm not yet ready to give up the house. I love the trees, except when I don't.
Gary Mason