What do Demographics Tell us about the Economy?

Is anybody uneasy about the economy these days? Are you unsure of what the future holds or whether the economy will pick up or plummet? Are you wondering what a good solid investment is today? Screenshot_060314_030429_AM

I, for one, tend to question the economists that paint a rosy picture in the media right now. There is some evidence out there for a halting economy ahead. As Harry Dent sums up in his new book, The Demographic Cliff, the economy is more predictable than most politicians and economists would have you believe. The best indicator to determine the direction of the economy: demographics.

According to Dent, on a broad worldwide scale this is what we can expect: As the Baby Boomer generation ages, a smaller generation is following it. This means not only slower growth, but most likely deflation.

Dent points out that consumer spending for those over the age of 51 declines. The highest point for spending in our lives is between the ages of 46 – 53. Baby Boomers spend less and there is not enough population in the younger generation to spend at the same level of spending we have seen in previous decades. It’s important to note when working with demographics, especially concepts such as these, that economies work on a macro and micro scale. What affects a country as a whole, may have a very different effect in particular areas.

For our part, we especially want to discern how this will impact the value of land. Land sales are traditionally a solid investment for appreciation. It’s very unlikely that we will see the wild appreciation that impacted prices in the last boom. However, land sales follow closely on the heels of the single family home market. People purchase their starter homes around age 31 and often their largest homes between ages 37-41. The oldest of the Millennial generation will be buying and trading up their homes in the coming years. Although this may keep real estate prices from completely dropping off the map, housing will be “on sale” as baby boomers sell and supply increases. With deflating prices on consumer goods and cheaper raw materials, the cost of building a home is more affordable. Land is even more affordable. This could be one of the best times to buy land before the full wave of Millennials reach their spending years and prices climb again.

Think about your plans for the future. It’s a great time to be prepared. Remember with every economic turn, something is going to bust and something else is ready to boom. Are you positioning yourself right to take advantage of the next boom?