Jump to content
House Price Crash Forum
Sign in to follow this  
Tempest

Is Hpi All Due To The Baby Boomers?

Recommended Posts

This is a tremendous piece of work which deserves attention if only to encourage debate about whether there will ever be (in the next 30+ years) another upswing in house prices of the kind we have had in the last 50 years. Could it be that property will never again (in real terms) attain these heights?

Trawling the web and found this from Sept 2005 - http://www4.ncsu.edu/~bkgoodwi/workshops/babyboom9_1.pdf

It looks like a research paper for a US University by a guy from the Federal Reserve Board. NB it looks like it is still draft and is marked "preliminary and incomplete - do not cite". So I am not citing and only really referring people to it and describing it's general proposition. If you have the appetite, skim through it but be considerate to the author if you wish to refer to it. It gets pretty technical on the financial modelling/maths side (you can ignore this and look at the general propositions and model results in the graphs at the end) but the general premise is that the growth in productivity and (housing) asset prices over the last 20-30 years is really down to the increases in population post WWII (who are of working age working now and who will start to retire in the next 10-15 years) - which has caused an increase in output/productivity growth putting upwards pressure on asset prices.

It will be interesting to note how it is received when it is finalised and published. The model seems to predict most of the previous house market booms/busts in the US, UK and Japan exceptionally well. It would seem to suggest that as those generations retire we are facing a long and heavy decline in asset (ie house) prices - not because of "lack of demand" for housing as such but because there will be declining output (ie less people of working age relative to today).

I think the predicted future UK and US house price graphs are too close as shown by the actual dip in UK prices which has started already and the real start of any long term decline in the UK may occur from 2008/9 rather than 2010/11 (actually, he says the decline in both US and UK could be anywhere between 2005 and 2010 depending on other factors). As for the Ireland one that is just frightening - suggests still some way up to go (due to young population etc) before it goes down the same way.

If this is anywhere near right it could make the "property is my pension" brigade look very shortsighted (absent further baby booms or massive immigration). Also, in a country with declining working population with heavy social/healthcare/pension costs (eg UK) I would suggest that the squeeze on incomes (ie more taxes to pay for it all) will exacerbate the effect of real reduction in output.

It is making me doubly sure I don't want to buy in the next couple of years and has opened my eyes (subconciously I think I was of the group that thought this HPC would be another cyclical downturn before yet another similar upswing from which I would benefit one day). Not so sure now.

Edited: For those who want the quick route through this go to p54 and figure 17 for the UK prediction of real house prices!

Edited by Tempest

Share this post


Link to post
Share on other sites

This is a tremendous piece of work which deserves attention if only to encourage debate about whether there will ever be (in the next 30+ years) another upswing in house prices of the kind we have had in the last 50 years. Could it be that property will never again (in real terms) attain these heights?

Trawling the web and found this from Sept 2005 - http://www4.ncsu.edu/~bkgoodwi/workshops/babyboom9_1.pdf

It looks like a research paper for a US University by a guy from the Federal Reserve Board. NB it looks like it is still draft and is marked "preliminary and incomplete - do not cite". So I am not citing and only really referring people to it and describing it's general proposition. If you have the appetite, skim through it but be considerate to the author if you wish to refer to it. It gets pretty technical on the financial modelling/maths side (you can ignore this and look at the general propositions and model results in the graphs at the end) but the general premise is that the growth in productivity and (housing) asset prices over the last 20-30 years is really down to the increases in population post WWII (who are of working age working now and who will start to retire in the next 10-15 years) - which has caused an increase in output/productivity growth putting upwards pressure on asset prices.

It will be interesting to note how it is received when it is finalised and published. The model seems to predict most of the previous house market booms/busts in the US, UK and Japan exceptionally well. It would seem to suggest that as those generations retire we are facing a long and heavy decline in asset (ie house) prices - not because of "lack of demand" for housing as such but because there will be declining output (ie less people of working age relative to today).

I think the predicted future UK and US house price graphs are too close as shown by the actual dip in UK prices which has started already and the real start of any long term decline in the UK may occur from 2008/9 rather than 2010/11 (actually, he says the decline in both US and UK could be anywhere between 2005 and 2010 depending on other factors). As for the Ireland one that is just frightening - suggests still some way up to go (due to young population etc) before it goes down the same way.

If this is anywhere near right it could make the "property is my pension" brigade look very shortsighted (absent further baby booms or massive immigration). Also, in a country with declining working population with heavy social/healthcare/pension costs (eg UK) I would suggest that the squeeze on incomes (ie more taxes to pay for it all) will exacerbate the effect of real reduction in output.

It is making me doubly sure I don't want to buy in the next couple of years and has opened my eyes (subconciously I think I was of the group that thought this HPC would be another cyclical downturn before yet another similar upswing from which I would benefit one day). Not so sure now.

Edited: For those who want the quick route through this go to p54 and figure 17 for the UK prediction of real house prices!

According to their model we have to wait until 2020 before house prices become resonable again! GRRRR.

Share this post


Link to post
Share on other sites

Yes I saw that - But I think the plateau he suggests may arrive more quickly (has arrived?) than he thinks ie 2006 rather than 2010 and the decline would arrive more quickly than he suggests as a result. His model (eg in the US, Japan and UK graphs) does seems to underpredict the rate of climb and fall in prices - although is a good match for the ultimate peaks and troughs. If you discount the potential for increases in real prices from 2005 suggested by fig 17 then it is not so bad - we can deem the long decline starting now (he says that is a possibility).

It is obviously easier to produce a model matching historic data than one forecasting 30 years out so I think the decline will happen a little faster than he does.

But it does give pause for thought - on the back of this, one could argue there is a liklihood of modest declines in prices over the next 2-3 years of the order of 10-20% nominal say (taking the froth off the market) and then a long period of gradual decline in real prices. ie a very long drawn out soft landing leading to a pit of despair.

I am going to have to buy in the next 2-3 years for family reasons. On this basis even if I pay 10-20% less than June 2004 prices I could be facing 1996 real prices in 15 years time. ie whenever you buy in the next 5 years you would be buying an asset which will decline in real terms over 20+ years. A sobering thought for all of us.

Baby boomers - Macmillan was right - they never had it so good.

Edited by Tempest

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp
Baby boomers - Macmillan was right - they never had it so good.
1957: Britons 'have never had it so good'

The British Prime Minister, Harold Macmillan, has made an optimistic speech telling fellow Conservative that "most of our people have never had it so good".

I think he was talking about the adult generation at the time. Today`s older boomers were around 12 year of age then. <_<

Share this post


Link to post
Share on other sites
Guest rigsby II

I think he was talking about the adult generation at the time. Todays boomers were around 12 year of age then. <_<

How old are baby-boomers supposed to be ?

Whats the age range ?

Just so I know.

(It seems a very convenient section of society to blame when there's some muck slinging to be done)

Ta

:)

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp

How old are baby-boomers supposed to be ?

Whats the age range ?

Just so I know.

(It seems a very convenient section of society to blame when there's some muck slinging to be done)

Ta

:)

The reference is to those born between 1940 and 1960

Share this post


Link to post
Share on other sites

It is obviously easier to produce a model matching historic data than one forecasting 30 years out so I think the decline will happen a little faster than he does.

Hahaha. Yes, of course! Their predictions will also get worse as a function of time. I guess their principal aim is to find an underlying reason for the present boom using historical economic conditions. I don't really see how they can factor in economic conditions over the next 50 years, e.g., interest rates, employment etc., which would have a major impact on their long term predictability.

K.

Edited by karhu

Share this post


Link to post
Share on other sites

I think he was talking about the adult generation at the time. Today`s older boomers were around 12 year of age then. <_<

I know! But little could those 12 year olds have known that hindsight would show that the phrase would eventually fit them too!

Btw, did you hear him say that live? ;)

Share this post


Link to post
Share on other sites

The reference is to those born between 1940 and 1960

that's his timeframe. I'm not disputing the validity of this, but I always imagined baby boomers to refer to those born in the immediate aftermath of the war when all the chaps came home, de-mob happy and got down to some serious hanky-panky... so I thought 1946 to 1956ish (for arguments sake)

Given that this represents my parent's generation, it is interesting to note that there wasn't a subsequent boom in the early/mid 70s when you would expect that generation to start having pups. In fact I was born during a relative trough for new births (1975).

If it is the aftermath of wars that produce these surges - does anyone know if anything similar happened from 1918-1925? Notwithstanding the flu epidemic of 1918.

Share this post


Link to post
Share on other sites
Guest rigsby II

The reference is to those born between 1940 and 1960

Phew, skin of me teeth that one.

At least I can sleep at night knowing that high house prices are not my fault <_<

Forget about charts and graphs and in-depth analyses, how can it be any one of a particular age thats to blame, thats just sour grapes bolleaux.

If you watch LocationX3 its late 20s and 30s that I'm gob-smacked can afford so much - and all that 'crash pad' second home nonsense - not a baby-boomer in sight

Escape to the Country its late 20s and 30s buy half a million pound pads because they have sold their flat in Notting Hill.

Prop Ladder its 20s and 30s doing up properties.

Estate agents doing the valuations are all spiky gel munkys in their 20s/30s

Late 20s and 30s have never had it so good

Just the early 20s that are knackered :(

(And those that missed the boat)

Share this post


Link to post
Share on other sites

…but the general premise is that the growth in productivity and (housing) asset prices over the last 20-30 years is really down to the increases in population post WWII (who are of working age working now and who will start to retire in the next 10-15 years) - which has caused an increase in output/productivity growth putting upwards pressure on asset prices.

This was discussed a year or so ago but unfortunately I cannot find the thread. I am re-posting a graph that I constructed from the National Statistics website data of births in England & Wales from 1938 onwards. It clearly shows two peaks, the first in the late 1940s which was due, quite naturally, to the returning soldiers ‘catching-up with their conjugal duties’ :D Demobilisation after WWII took several years.

The second peak in births is more serious, the peak being in 1964 and the number of people in that baby-boom time is greater than the immediate post-war one, the latter being quite narrow in time. The post-war boomers are now retiring, the 1960's boomers are middle-aged & presumably at their peak economic activity.

births.pdf

births.pdf

Share this post


Link to post
Share on other sites

This is a tremendous piece of work which deserves attention if only to encourage debate about whether there will ever be (in the next 30+ years) another upswing in house prices of the kind we have had in the last 50 years. Could it be that property will never again (in real terms) attain these heights?

Trawling the web and found this from Sept 2005 - http://www4.ncsu.edu/~bkgoodwi/workshops/babyboom9_1.pdf

It looks like a research paper for a US University by a guy from the Federal Reserve Board. NB it looks like it is still draft and is marked "preliminary and incomplete - do not cite". So I am not citing and only really referring people to it and describing it's general proposition. If you have the appetite, skim through it but be considerate to the author if you wish to refer to it. It gets pretty technical on the financial modelling/maths side (you can ignore this and look at the general propositions and model results in the graphs at the end) but the general premise is that the growth in productivity and (housing) asset prices over the last 20-30 years is really down to the increases in population post WWII (who are of working age working now and who will start to retire in the next 10-15 years) - which has caused an increase in output/productivity growth putting upwards pressure on asset prices.

It will be interesting to note how it is received when it is finalised and published. The model seems to predict most of the previous house market booms/busts in the US, UK and Japan exceptionally well. It would seem to suggest that as those generations retire we are facing a long and heavy decline in asset (ie house) prices - not because of "lack of demand" for housing as such but because there will be declining output (ie less people of working age relative to today).

I think the predicted future UK and US house price graphs are too close as shown by the actual dip in UK prices which has started already and the real start of any long term decline in the UK may occur from 2008/9 rather than 2010/11 (actually, he says the decline in both US and UK could be anywhere between 2005 and 2010 depending on other factors). As for the Ireland one that is just frightening - suggests still some way up to go (due to young population etc) before it goes down the same way.

If this is anywhere near right it could make the "property is my pension" brigade look very shortsighted (absent further baby booms or massive immigration). Also, in a country with declining working population with heavy social/healthcare/pension costs (eg UK) I would suggest that the squeeze on incomes (ie more taxes to pay for it all) will exacerbate the effect of real reduction in output.

It is making me doubly sure I don't want to buy in the next couple of years and has opened my eyes (subconciously I think I was of the group that thought this HPC would be another cyclical downturn before yet another similar upswing from which I would benefit one day). Not so sure now.

Edited: For those who want the quick route through this go to p54 and figure 17 for the UK prediction of real house prices!

This must be the first time I have heard the new phrase - Prices only ever go down! :lol::lol::lol::blink:

Share this post


Link to post
Share on other sites

that's his timeframe. I'm not disputing the validity of this, but I always imagined baby boomers to refer to those born in the immediate aftermath of the war when all the chaps came home, de-mob happy and got down to some serious hanky-panky... so I thought 1946 to 1956ish (for arguments sake)

Given that this represents my parent's generation, it is interesting to note that there wasn't a subsequent boom in the early/mid 70s when you would expect that generation to start having pups. In fact I was born during a relative trough for new births (1975).

If it is the aftermath of wars that produce these surges - does anyone know if anything similar happened from 1918-1925? Notwithstanding the flu epidemic of 1918.

I think the phrase baby boomer is originally a US one and if you look at figure 2 in the paper you will see that is indeed a boom in under 5s from 1940 to 1960. In the UK (figure 16) we had a shorter post war boom as you suspect 1940-1950 - but we followed that up in the UK witth a further mini boom in the mid to late 1960s.

Its not that that generation did not have pups in the 70s/80s - they just had less pups! Birth rate went from a peak of something like 2.8 kids to 1.3ish (?) now.

Not sure about figures from post WWI - but with the effects of the flu pandemic and the need to replace the million or so Brits who died in or as a result of the War we were probably down on the pre war rate.

Share this post


Link to post
Share on other sites
If you watch LocationX3 its late 20s and 30s that I'm gob-smacked can afford so much - and all that 'crash pad' second home nonsense - not a baby-boomer in sight

its not the buyers that are greedy - its the sellers.

more than often - pesky boomers.

Share this post


Link to post
Share on other sites
Just the early 20s that are knackered

(And those that missed the boat)

what boat ?

ah, you mean the boat you all had a space on, which you then set sail for greed island and asked the younger generation to swim even further for. and further. then further. then a bit further.

your ship will sink as theres no one going to be able to repair it.

i for one wont be throwing a lifeline. no pension, no cash - no careeeey...!!

Share this post


Link to post
Share on other sites

Phew, skin of me teeth that one.

At least I can sleep at night knowing that high house prices are not my fault <_<

Forget about charts and graphs and in-depth analyses, how can it be any one of a particular age thats to blame, thats just sour grapes bolleaux.

If you watch LocationX3 its late 20s and 30s that I'm gob-smacked can afford so much - and all that 'crash pad' second home nonsense - not a baby-boomer in sight

Escape to the Country its late 20s and 30s buy half a million pound pads because they have sold their flat in Notting Hill.

Prop Ladder its 20s and 30s doing up properties.

Estate agents doing the valuations are all spiky gel munkys in their 20s/30s

Late 20s and 30s have never had it so good

Just the early 20s that are knackered :(

(And those that missed the boat)

I see what you are getting at but I think the paper means that with more money around (from the increased populations work) demand for assets increases - some people as you describe have capitalised on that demand (or partially contributed to it) others are suffering because of it.

I agree there can be to many charts but people admit to the looming pensions, social security and healthcare funding crises here and in the US as demographics change - if that can cause an increase in demand for pensions/healthcare why not also housing?

what boat ?

ah, you mean the boat you all had a space on, which you then set sail for greed island and asked the younger generation to swim even further for. and further. then further. then a bit further.

your ship will sink as theres no one going to be able to repair it.

i for one wont be throwing a lifeline. no pension, no cash - no careeeey...!!

Anyone care to start a thread on what incentives there will be to stay in a country with a high tax rate and a 2:3 ratio of workers to people of pensionable age if the working generation has to fund it all. How can 2 workers fund what 3 people now fund? That is what I understand to be forecast for 2030 (ie my kids' generation)?!

Edited by Tempest

Share this post


Link to post
Share on other sites
Guest rigsby II

what boat ?

Come on Fred, you are pushing 40 if I remember rightly. You had plenty of time to get on the boat with the rest of us greedy and selfish homeowners.

ah, you mean the boat you all had a space on, which you then set sail for greed island and asked the younger generation to swim even further for. and further. then further. then a bit further.

Ever the drama queen Fred.

no pension, no cash

Ah but a nice business 'worth' £450,000 pounds Fred. Hardly breadline IMHO.

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=109816

Share this post


Link to post
Share on other sites

Given that this represents my parent's generation, it is interesting to note that there wasn't a subsequent boom in the early/mid 70s when you would expect that generation to start having pups. In fact I was born during a relative trough for new births (1975).

There was a house price boom mid 70's

As far as I'm know baby boomers are 1945-1965

Share this post


Link to post
Share on other sites

The boom I was referring to was the second mini boom in birth rates in the mid to late 60s not the early 70s price boom. However, while on that subject, in light of this paper, one could argue that the early 70s boom was assisted by the UK baby boomers (who would be approaching 30 then) getting onto the housing ladder and then moving up through it during the other late 70s and late 80s booms. As someone else said, those born in the 60s are at or approaching peak earning power now and all that goes with that (more money, families, need for bigger houses etc) and may account for some of the recent boom. There is speculative froth in all booms but there is still underlying demand behind that which then prompts the follow on "don't miss boat" mentality. I see that population growth ought to be a large driver of that. Maybe the slower population growth in the 70s is reflected in the 30 yr olds now who can't get on the ladder - who knows!

Its all making much more sense now. I really think there is something in this population theory. What with house prices, pension issues etc no wonder the Govt is encouraging/allowing mass unchecked immigration. We're going to need it to pay for the future.

Edited by Tempest

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp
The boom I was referring to was the second mini boom in birth rates in the mid to late 60s

That would be the time of the new so called sexual freedom when single girls no longer were treated as social outcasts. It would be interesting to know what the stats were at that time and age groups. Many hastily arranged marriages were the norm. The girl next door to me had 3 children by the time she was 21 and divorced at 23.

Share this post


Link to post
Share on other sites

that's his timeframe. I'm not disputing the validity of this, but I always imagined baby boomers to refer to those born in the immediate aftermath of the war when all the chaps came home, de-mob happy and got down to some serious hanky-panky... so I thought 1946 to 1956ish (for arguments sake)

Given that this represents my parent's generation, it is interesting to note that there wasn't a subsequent boom in the early/mid 70s when you would expect that generation to start having pups. In fact I was born during a relative trough for new births (1975).

that lack of boom is probably down to the advent of "the pill"....first brought out in very late 60's/early 70's...just the kind of time the boomers would have been expected to multiply.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.