Housing will remain hot
Echo boom generation boosts sales
There’s a new kid in town ready to save Canada’s housing market and maybe even the economy — at least for a few more years.
A new report says that Canadian residential real estate has been getting a huge boost from so-called echo boomers, those in the 20-to38 age bracket.
“The Canadian housing market keeps soldiering on and, while much focus is cast on brash calls of overvaluation, mortgage rate wars and mortgage rules, demographics are playing a less-publicized yet important role,” Bank of Montreal economist Robert Kavcic said in the report released Thursday.
“The baby boom generation grabs most of the attention on this front, but their children, the echo boomers, pack a heavy economic punch as well.”
Even though there are just under 10 million Canadian baby boomers aged 49 to 67, they are actually outnumbered by those aged 20 to 38.
In an interview, Kavcic said the emergence of the echo boomers bodes well for the overall economy but, like housing, the tide will eventually turn because the next cohort coming through simply isn’t as large.
“For the next couple of years, there is enough population to support the retiring population, but when you look out past 2018, the bulk of the baby boomers are approaching 65 and behind the echo boom there is a significant dip in the population,” he said.
Fertility rates among boomers have been lower than for their parents, resulting in fewer children. But the gap has been filled by immigration, which the economist said has been concentrated in the echo boomer age group.
While there were other factors that coincided with a housing downturn in 1989, Kavcic noted there was a huge plunge in population growth in the 25-to-34 age group in the 1990s.
“Interestingly, it was only when this age group began to expand again on a sustained basis (around 2002) that the next bull market really began, in part because of a pickup in immigration, but also helped by the aging of the echo boomers,” he wrote in the report.
The problem is what comes next. He said there are a few more expansion years in the housing market based on this age cohort, but there will be some stagnation starting in 2018.