Boom, Boom, Boom

In recent years, it's impossible to turn on the television or read the headlines without seeing a warning of impending doom. Experts claims there is a housing bubble and it is about to burst. Should first-time and move-up homebuyers be concerned? No.

We keep hearing about the bursting bubble, yet the real estate market continues to boom. How can this be? Demographics are the primary reason.

The most significant and frequently mentioned demographic is the "Baby Boom" generation, which refers to children born in the years following World War II. Economic forecasting expert and author, Harry Dent, has written extensively about how property buying habits occur in a predictable fashion as a generation ages. From needing an apartment in college, to buying a starter home and eventually trading up to something larger, it is all cyclical. Since the Baby Boom generation is the largest so far, their impact has been far greater than the generations that preceded them.

Now that Boomers have moved into their top earning years, they continue to push the housing market to new levels. They are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of home sales going toward second homes and 23% of sales going toward investment properties.

Demographic trends don't end there:

Immigration - There has been a large influx of immigrants over the past three decades.

Children of Baby Boomers - This generation is now in their twenties and looking to purchase their first homes.

Retirees - While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of disease, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.

In addition to the demographic factors listed above, real estate has been a rewarding investment. Stocks and bonds have not performed as well as investors were used to, while real estate has exceeded expectations. In an uncertain world, people are more comfortable investing their money in property that will appreciate and can be lived in.

Don't buy the hype about a bursting bubble. Three years have passed since the doom and gloom predictions started. The real estate marketing will continue to flourish.

Posted by Karen Love on December 13, 2008 at 12:00 AM

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