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April 25, 2016 | Big news

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


Prince, Bowie and Shandling aside, the Boomers ain’t dead yet. Far from it. The last one doesn’t turn 65 for another 15 years. Besides, sixty-five is the new 45. So suck it up.

The boom lasted two decades, during with 8.2 million babies were popped – about 415,000 a year. That means we now have almost 8,000 people a week becoming seniors, starting to collect their OAS & CPP, and riding public transit to work in their executive positions at half fare. Wo-hoo. Boomers’ moms, on average, had 3.7 kids while today’s moms birth half that number.

So about a third of all the souls alive in this country are part of this cohort (post-WW2 immigration bolstered the numbers to 9.2 million), which means by the time they are all old farts, a quarter of the population will be over 65. Currently it’s 12%. That’s big news.

Millennials should be aware of two things. First, taxes are going up. Like, a lot. Your guy Justin will be adding $125 billion in debt over the next four years, which will ensure a tax increase down the road, plus all these Boomers constitute a health care hurricane. With 1,600 more people hitting retirement age every working day of the week (and only 1,040 new babies being born), get ready. Your parents are about to become your worst nightmare. Inheritance? You wish. (By the way, didja hear about poor Alberta?)

Second, Boomers have more houses than anybody and (generally speaking) not enough money to last for two or three decades. Thus, real estate equity will have to be crystallized in order to provide monthly cash flow. Already this is starting to show. (Seventy per cent of us own houses but 90% of Boomers have property.)

A new Re/Max poll conducted by Leger Research found that among Boomers aged 55 to 64, a whopping 56% are thinking about selling in order to muster a retirement nest egg. Smart, of course. Real estate markets in a few places (GTA and YVR) are utterly bloated, while in others (Victoria, 905, Montreal) they’re near peak levels and still others (Calgary, Edmonton, Winnipeg and that flat province) are slow but not yet cratering. So hardly a better time to cash out.

But most won’t do so. People in Toronto or Vancouver worry about downsizing into a market with a deficit of houses and a surfeit of horny buyers. Plus, so long as prices rise, human nature (greed) prevents a majority from doing the rational thing, and bailing. All that will change, once markets start to decline as mortgage rates swell. Trust me. It’s coming.

Meanwhile the stats on liquid wealth accumulation in Canada are truly sad. RRSP contributions have been withering annually, while 80% of tax-free accounts are in pay-nothing, interest-bearing savings products. Forty per cent of families live paycheque-to-paycheque and half of us say we’d be screwed missing one paycheque. Household debt, famously, is at the highest level in recorded history, and substantially above the point at which the US middle class blew up. The economy may have started to turn upwards in the last few months, but so has personal borrowing. It’s now running four times the rate of increase in incomes.

In short, every day more net worth in this country becomes concentrated in residential real estate. And because the Boomers own more of it than anyone else, now headed as a herd into their thirsty undies and plastic-hip-sex-pill years, you should expect a big housing sell-off ahead. Some of them will cash out, invest the money and live off the proceeds. Some will downsize and consume the extra capital. Some (poor fools) will believe what they hear on TV and get a reverse mortgage. Others will give their houses to their kids, and move into the basement.

There are some lessons here.

Parents with questionable retirement resources giving their adult kids money for down payments need their heads read. Most can’t afford the largesse and this is absolutely the wrong time to be pushing your offspring into housing. Every indication is that our property bubble will end, and when it does a demographic tsunami may well commence. Why not wait?

Boomers must get far more serious about the financial path ahead. Life’s long. The greatest risk around is running out of money. Houses cost a lot to own, and the equity in them won’t buy the groceries. Unless you have a juicy government pension or a seven-figure retirement fund, you’d be wise to sell, invest and rent. Given the historic collapse in interest rates (which will eventually end) how could there be a better time to capitalize on real estate excess?

The fact 56% of Boomers are starting to think this way should tell you something. Don’t wait.

Has there ever been a better time to sell?


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April 25th, 2016

Posted In: The Greater Fool

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