Thank you again for a great commentary!!! Justin Trudeau can say "housing needs to retain its value", but what really happens depends on the laws of economics. If the millennials cannot afford to buy the large boomer homes, the prices will come down. At some point a good portion of the boomers will have to sell. The alternative may be large wage inflation, to make buying a house affordable, but this will bring problems of its own.
As far as the economics of inheritance goes....
It has been assumed that large inheritances will be passed from the boomers to the millennials.
I am not entirely convinced that this will be as much as anticipated. Why? There are a number of variables at play.
1) Inflation- Boomers need a monetary nest egg, or good pension (a rare beast) from which to draw living expenses. Depending on how much has been saved and protected from the ravages of inflation, will determine how long the accumulated monies will last. We are also living longer.
2) If boomers rely on their homes as nest eggs, but have no buyers, they will be forced to accept lower prices and thus , have less money from which to draw living expenses.
3) Escalating health care costs.
4) Boomers, and I count myself among them, are quite happy to spend the money that they worked hard at saving. Our time is getting shorter and we want to experience travel, hobbies, buy that sail boat etc...In my particular case, my kids got an education and a home down payment. A good start for them now....not 20 years from now , when I pop my clogs!
5) Inheritance Taxes... A cash strapped government will definitely implement these if too much untapped wealth is slipping through their fingers. It happened in Europe.
Hi Daniel!!
Thank you again for a great commentary!!! Justin Trudeau can say "housing needs to retain its value", but what really happens depends on the laws of economics. If the millennials cannot afford to buy the large boomer homes, the prices will come down. At some point a good portion of the boomers will have to sell. The alternative may be large wage inflation, to make buying a house affordable, but this will bring problems of its own.
As far as the economics of inheritance goes....
It has been assumed that large inheritances will be passed from the boomers to the millennials.
I am not entirely convinced that this will be as much as anticipated. Why? There are a number of variables at play.
1) Inflation- Boomers need a monetary nest egg, or good pension (a rare beast) from which to draw living expenses. Depending on how much has been saved and protected from the ravages of inflation, will determine how long the accumulated monies will last. We are also living longer.
2) If boomers rely on their homes as nest eggs, but have no buyers, they will be forced to accept lower prices and thus , have less money from which to draw living expenses.
3) Escalating health care costs.
4) Boomers, and I count myself among them, are quite happy to spend the money that they worked hard at saving. Our time is getting shorter and we want to experience travel, hobbies, buy that sail boat etc...In my particular case, my kids got an education and a home down payment. A good start for them now....not 20 years from now , when I pop my clogs!
5) Inheritance Taxes... A cash strapped government will definitely implement these if too much untapped wealth is slipping through their fingers. It happened in Europe.
Just my musings!!
Cheers,
Tamara
Great points. In this regard, it may make sense that they front-ran this sell off of assets with the capital gains tax increases too