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  • Writer's pictureSteve

A Silver Tsunami?

As 2024 begins and financial journalists and pundits the world over give their opinions on what the coming year holds it seems important to think not just now but for the entirety of the coming year about something very important - that being the idea of how we consume news and mass media.  While this discussion can certainly apply to many areas of our lives including politics, health, science, etc. I'd like to focus now solely on the financial realm.  To start, I'll use a recent example.  If you've got 60 seconds, give this article on the housing market a quick read.  

Done?  If you didn't have time, I'll summarize.  Analyst Meredith Whitney, known for her 2008 call anticipating the Great Financial Crisis, believes a "silver tsunami" of retiring baby boomers will begin downsizing their homes later this year creating strong downward pricing pressure in the housing market.

Perhaps you're a reader who's been looking to buy a bigger/nicer home and you're thinking this is fantastic news!  Or maybe you're someone planning to sell your home in the next few years and this article has you thinking maybe you ought to get it listed sooner rather than later.  Whatever your reaction, before calling the moving company, let's see what local realtor Ken Crifasi, of K&A Properties said when I showed him the article:

I think she is oversimplifying something that is, in reality, quite complicated. Many factors impact house prices: demand, jobs, belief in the strength of the economy, interest rates, lending standards, local business growth, perception of quality of life in one area vs. another, the legalization of recreational marijuana use in one area vs. another, climate change, demographics, and many more. For her to point to one factor and claim that she knows precisely how a change in that one thing will affect the whole system over some lengthy period of time seems foolishly overconfident to me... To have that belief, one would have to be proposing that there will be no changes in any of those other factors that also impact home prices. Quite clearly, that is an impossible thing to know.

However, the demographics that she is citing are accurate, but they're only half of the demographic story. There are a lot of aging boomers who will be downsizing, but there are even more 25-34-year-olds who will be coming up on their prime home-buying years (34 years old on average). So, for the next 7-10ish years, there should be plenty of demand regardless of what happens with boomers. After that, the number of potential new home buyers starts to decrease, and it will be interesting to see how that impacts the market a decade from now.

One thing that she didn't address. What are we assuming the boomers are downsizing into? If they're moving into smaller homes, how does that lessen demand for the overall housing market? I can see where it shifts some demand from one segment of the market to another, but I don't see how, all of a sudden, we need fewer homes.

So, cancel the moving truck?  I'm not sure. 

Either way, the point is that flying off to large financial decisions based on one news article with one analyst's opinion is probably not going to be terribly wise.  Instead, when I'm formulating investment decisions, I often read the comment section, if available, too.  Sure, some comments are worthless, others inappropriate, and still more contain a link to "Satisfy your mate every time!" (no help needed there, lol!) but often I find therein the antithesis to an opinion that seemed mighty convincing just a moment ago.  Alternatively, ask a trusted professional in the field.  That could be your financial planner, realtor, mortgage lender, insurance broker, estate planner, etc.   An honest, trusted professional would likely be happy to share their measured and informed thoughts with you, thoughts that aren't driven by clickbait, than to hear later of an ill-informed and harmful decision.  So, as 2024 gets going and your iPhone starts pelting you with news stories, please remember to take your reading with, as the old saying goes, a grain of salt.  

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