The American economy is about to be completely disrupted by a tsunami I like to call “The Great Baby Boomer Sell Off.”
The concept here is both simple and inevitable; people tend to sell stuff off as they get older. There are around 74.9 million Baby Boomers and they are definitely getting older.
The standard definition of a “Baby Boomer” is a person born in the 20 years after World War II; defined as either 1946 to 1964 or 1945 to 1965, depending on who you ask. That means the youngest boomers are 51 to 52 years of age, while the oldest are now 73.
The Biggest Yard Sale in History
The aging of the Baby Boom will have many profound effects on the economy; the first of these to be seen will be the biggest yard sale in history. This will occur because people dispose of assets in three phases as they age.
The first thing older people get rid of are personal possessions such as clothing, furniture, vehicles and collectibles. This is already occurring big time as anybody who has checked out the prices of comic books or coins on eBay in recent years knows.
Such a trend will heat up as Boomers sell their homes and move to Florida, downsize to smaller places, and start moving to retirement or communities or care homes. Basically the price of collectibles, antiques, vintage clothing and used furniture is about to collapse as the market becomes flooded with such items.
The situation will be made worse by a serious generational disconnect, USA Today predicted. The boomers’ kids; Generational X and Millennials, tend to value experiences over material goods and prefer a simpler lifestyle. Instead of being passed on, the contents of many homes will be sold, donated to Good Will or simply pitched in the dumpsters.
This will make some great bargains at garage and estate sales. There will also be lots of business opportunities here including estate auction operators and trash out businesses that quickly clear homes.
Many collectors, junk dealers and pickers are going to have the time of their lives at what will amount to the biggest yard sale in history. Meanwhile a lot of materialistic Boomers are going to be in for major heartache.
The Great Real Estate Sell Off
After possessions, the next thing that aging people tend to dump is real estate. They first unload rental, business, investment and vacation properties, but eventually sell their homes.
The real estate sell off will come in three waves, the first of which is under way and may not have much impact. This phase consists of people selling homes so they can migrate to the Sun Belt, or downsize to a smaller home.
Such selling has little effect on property values because people can take their time to sell. We might be seeing some effect from this selling in cities like Denver and San Francisco where aging boomers are cashing in on high real-estate prices.
The second wave comes when people have to leave their homes because of financial or health reasons. That is they run out of money, can no longer physically maintain the property or need to go to a nursing home or move in with the kids. The third wave will come when the Boomers die, and their heirs want to unload the home.
Real Estate Prices are About to Collapse, thanks Boomers
The second and third waves should scare us because a lot of property will be sold fast. That will depress prices and deflate the real estate market. A similar scenario is already playing out in Japan where home values fell by 60% over the past 30 years, author Harry S. Dent Jr. noted in his excellent book The Sale of a Life Time.
Such selling will drag down property values because many of the homes will be in places Millennials and Generation Xers simply do not want to live. This includes farther out suburbs, and places like Pennsylvania, Vermont and Upstate New York.
Expect to see the first big wave of home sell offs begin soon because one in three Americans; and presumably one in three boomers, has nothing saved for retirement, Time reported. This includes the 52% of boomers that are planning to work longer, The Motely Fool reported.
The only way a lot of those people will be able to finance retirement is by selling their homes. The first wave of sellers will be those whose plans to work longer are cut short by health problems or job loss.
This sell off will continue throughout the 2020s with home values hitting rock bottom sometime between 2030 and 2035. Some real estate markets; particularly those in the Midwest, California, Arizona and New England, may never recover from the resulting collapse.
Baby Boomers are about to Crash the Stock Market Too
Disturbingly real estate is not the only market that Boomers have distorted; they have also had a dramatic impact on the stock market. This will occur because the third thing that older people dump before dying is investments and savings much of which is now in the form of stocks and mutual funds.
A big reason why the S&P 500 has grown by 71.71% over the past five years is retirement investing, mostly by Boomers. The amount of money managed by Vanguard; the largest U.S. indexed fund provider, quadrupled over the last few years, rising from $1 trillion to $4.2 trillion, The New York Times reported. Most of that money is invested in stocks via indexed funds.
This investing extends even beyond America, Australians had $2.2 trillion invested in superannuation or retirement funds in December 2016. Since there are around five million Baby Boomers Down Under, it is obvious who controls most of that money.
The collapse will come when the Boomers start selling off all that stock to fund their retirement. That might begin sooner than you think, disturbingly one out of four boomers is already raiding his or her retirement accounts to pay bills right now,The Washington Post reported. Up to 36% admitted they will have to pull money out for nonretirement expenses.
My prediction is that the current bull market will peak around 2020, and slowly fall off during the 2020s as more and more Boomers sell off stock. Expect to see a major Bear Market in the late 2020s as large amounts of stock is dumped on the market by aging Boomers. To matters worse; around 12% took out loans against their 401K or IRA to pay bills.
How to Cash in on the Great Boomer Sell Off
Not surprisingly there are some ways that Millennials and Gen X can cash in on the Great Boomer Sell Off. They include:
- Estate sales and yard sales. Try showing up near closing time on the last posted day and bring cash. Offer to take stuff away for free. Look for collectibles that you can sell on eBay or Amazon and things you can flip.
- Trash out. Set up a business that cleans out homes and pitches parents’ possessions. It’s a chore that people hate and they may be willing to pay for it.
- Dumpster rental. When Boomers die or move out a lot of their stuff will need to be thrown away and there will be too much to fill trash cans.
- Estate auctions. The big money here will be made by the auctioneers. If you have a good voice, consider auction school.
- Avoid real estate for a few years. House values are about to plunge, if you do not own, don’t buy now.
- Sell your home real estate prices in much of the country have probably peaked.
- Store up a lot of cash. Put your money in CDs, money markets, savings accounts or highly liquid investments like cryptocurrencies.
- Avoid those stocks Boomers like. This includes sentimental favorites like Disney (NYSE: DIS) and Berkshire Hathaway (NYSE: BRK.B) and beloved brands such as Apple (NASDAQ: AAPL) these shares will fall because lots of them will be dumped on the market as cash-strapped Boomers sell.
- Invest in real estate or businesses in fast-growing retirement areas such as Yuma, Arizona, and Hilton Head, South Carolina.
- Buy stock in companies that might profit from all those sales of Boomers’ junk. This includes eBay (NASDAQ: EBAY) and Etsy (NASDAQ: ETSY) and Berkshire Hathaway (NYSE: BRK.A) which owns realty companies.
- Cash home buying/flipping. During the next two decades a lot of people are going to unload a lot of residential property fast. Persons that show up with cash may get some real bargains. Be highly selective because a lot of property will never recover the value it has right now.
- Somebody is going to have to haul all those old vehicles that aging Boomers are going to leave behind to the scrap yard. A lot of other Boomer possessions including appliances, lawn furniture and grills will also need to be scrapped.
- Demolition/remodeling. A lot of Boomers’ homes will be unsellable in the 21st Century real estate market. That means somebody will be making good money either demolishing or remodeling those houses. One big activity will be bulldozing single family homes to make way for apartments and other multifamily structures. Another will be remodeling McMansions into apartments or office space.
Everybody needs to be aware of the Great Boomer Sell Off because it is coming straight at us. Those that see it coming will make a lot of money, the persons that don’t will be wiped out the Boom generation’s last hurrah.