September 17, 2012 (Investorideas.com Newswire) - eResearch Corp reports: The market is increasingly contemplating the resumption of inflation. Short-term, inflation is not likely in the cards. But, looking out, rising prices and interest rates could spur inflationary forces throughout the economy.
However, our demographics portend that deflation, not inflation, could easily become the dominant economic consideration in the years ahead.
The first wave of the Baby Boomers (some 39.5 million in the USA and 5.1 million in Canada) have now reached the age of 65, and are heading into, or are already in, their Retirement Years. These are characterized by less spending and more saving. We have never experienced such a large component of the population reaching this level. There are more old people, and more old people living longer.
When it comes to personal expenditures, the largest item in the cost of living is housing. Old people do not buy houses; they sell large houses and either downsize or move to apartments (or go into nursing homes!).
The burgeoning seniors class is likely to have serious repercussions for residential real estate. Those wealthy enough to have built 4,000-8,000 sq.ft. monster homes, with a multitude of bedrooms and bathrooms, have become empty nesters, and will want to sell. So, they downsize to a 1,500-2,000 sq.ft. townhouse or rental apartment. As they age further, the next stop is the nursing home, then a burial plot. That could be the future for residential real estate. With younger population growth ebbing, who is going to buy those monster homes?
Old people are savers; they do not spend money – not on houses, appliances, cars, cottages, boats, or expensive luxury goods.
So, what do they spend on? Well, they bribe their grandchildren, then head off on cruises where they consume copious quantities of food and booze, complain about their aches and pains, then come home and watch golf.
This news is published on the Investorideas.com Newswire and its syndicated partner network
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