NOW that we are here at last in the new mil- lennium, what does this mean for real estate? I don’t think anyone cares - here house prices are going co be 1,000 years from now but they do care about the next 5, 10 or 20 years. Certainly it is an important question for empty-nest home owners. If prices are going to go into a long decline they might want to sell their homes now. However if prices are going to hold their own or increase, then they may well Want to stay put. It is impor- tant for other home owners too, as well as for potential buyers, as the answer will also have an impact on their home owning strategies. Basically there are two schools of thought on the longer term outlook for hous- ing prices. One schoo! main- tains that empty nester baby ort le Feat a iotos? economics boomers will bail out of single family homes causing prices to continually erode as we move into the new century. A semi- nal study published in 1989 by two Harvard professors projected that the inflation- adjusted prices of U.S. homes would drop throughout the 1990s and beyond by a cumu- lative 47% by 2007. The opposing schoo! of thought is presented ina research paper published in October by the Royal Bank of Canada. Basically this study says that i¢ is much foo sim- NEWS phatos Cindy Goodman Friday, January 7, 2060 - North Shore News - 35 SCHOHOSSSSGesseeeeeeeeeeSeseveee eevee eteeeesocensceaegseeceoseseenaeece plistic ro just assume that empty nester baby boomers are going to sell out and therefore drive single family homes prices down. There are a lot of other variables at play and when you take these into account then you arrive at a different conclusion. Onc of these other key variables is income. The Royal Bank study presents data to show that rising incomes over the past few decades have dri- ven an increase in both home ownership and size of home, despite the fact that family size has fallen. It is expected that the continued rise in incomes, plus the considerable wealth that will be inherited by baby boomers, will support the demand for single family homes and to a large extent offset any pure demographic effects. A second factor is replace- ment buyers. Even if most retirees did sell cheir houses, i per impact onan‘ indi al ‘neighbourhood : oro} est Vancouver as a whole.” iC prices expeciet there are probably enough replacement buyers coming along to keep the market healthy. While it is estimated that there are about 9.8 mil- lion baby boomers in Canada, there are also abou* eight mil- tion members of the boom- echo generation who are their children. It is expected that approximately 370,000 baby boomers will be retiring annu- ally by the year 2,010, with the number rising to 425,000 by 2020. However at the same time the boom-echo kids will be entering the home buying ages at a rate of between 360,000 and 400,000 per year. The modest difference between these ewo groups should easily be made up for by expected immigration levels of between 200,000 and 250,000 per year. In addition to the above points there are other argu- ments that suggest there won't be a meltdown in the fo ii single family housing market. One of these is the move towards offices in the home. The Royal Bank study pre- sents data showing that in 1990 the number of people working out of their homes was up considerably from 1980 levels and this of course was before the Internet really had an impact. I think it is safe to say that, with all the com- munications advances we have seen, the wend to home offices is only going to accel- erate. This in turn will increase the demand for larger, sipvle family homes. Another factor is the recent availability of financial innova- tions such as reverse mort- gages and home equity loans that offer home owners the ability to use their home equi- ty to finance their retirements without having to sell. These innovations make it less likely that retirees will have to sell their homes to finance their retirements. I think the Royal Bank study makes a pretty convinc- ing case that the market for single family horaes will remain healthy over the fore- seeable future. It should also be noted that the study men- tioned above that predicts a precipitous drop in housing prices has been way off track as far as its forecasts for the 1990s go. The Royal Bank study ana- Iyzes only the national hous- ing market in detail but it does mention that in Toronto, Montreal and Vancouver, the large number of immigrants should easily offset any retire- ment outflows. Figures avail- able trom Statistics Canada suggest that this certainly should be the case. Last year B.C. received about 20% of the inunigrants who came to Canada, even though we only have about 13% of rhe popula- tion, The Vancouver area has always been a very popular destination for immigrants and there is no reason to believe that this will change. As far as the North Shore goes, we have our share of young, potential home buyers plus a steady stream of immi- grants joining the cormmunity. North and West Vancouver have always been considered desirable places to live and there is no reason to think~ thar chis. will change in the future. Furthermore there will be very little new single family housing coming onto the mar- ket in either community in the future. Everything considered, it looks like prices for single. - family housing on the North Shore will remain healthy for the foreseeable future. — Trent Appelbe is a real estate agent and an_ economist with Re/Max Crest Realty. 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