Question

Now that the “baby boomer generation” is of retirement age, other things constant, what do you think is its impact on asset prices? What is the impact of the “baby-boomer generation” on housing prices? What do you think is the impact on other investable assets like equities?

Answer 1

The effect of baby boomers going into retirement can put downward pressure on equity returns because of the equity sales that are retirement induced. This can lead to the overall demand in the US equity.

As the baby boomer generation reaches retirement age, there are a number of trends in housing that are affected . As for some time, many of the baby boomers will prefer to stay in their single family houses. This will result in higher spending in remodelling of the existing homes along with lower turnover in the overall housing market. The housing market would also be affected by the rise in incomes of the individuals over 65 as a result of long working lives. On the other hand, huge mortgage debt is a concern for the older homeowners as they will be faced with declining incomes .Along with this the other concern is that the median amount of debt has nearly doubled.Moreover, the median equity of the older homeowners was down.

Over the subsequent years, as the oldest babyboomers will be hitting the 70s, there will be changes in the spere of living independently. Nicholson quotes”The facts that many older adults live alone, have at least one disability, and have limited resources to pay for housing creates a situation in which demands for housing that is affordable, accessible, and can provide both social connection and supportive services will grow greatly over the next 20 years. The report suggests that “the unprecedented growth in the number of senior households will test the ability of the nation’s housing stock to address the spiraling need for affordable, accessible and supportive units.”

In the countries where the stock market participation is great, like Australia, Canada, Newzealand, UK .and USA, studies suggests that the real financial assest prices may continue to rise with the increase in population age. This is because housholds mostly continue to accumulate financial wealth well into old age and do very little to run down their savings in retirement.