MBA Study: Housing Demand Expected to Surge Over Next 10 Years
The Mortgage Bankers Association, in a new research paper, projects between 13.9 and 15.9 million additional households will form by 2024, making the next decade one of the strongest in housing in U.S. history.
The report, Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households, shows that the housing demand surge will be driven by Hispanics, Baby Boomers and Millennials.
"Household formation has been depressed in recent years by a long, jobless recovery and by a lull in the growth of the working age population," said MBA Vice President of Research and Economics Lynn Fisher. "Improving employment markets will build on major demographic trends-including maturing of Baby Boomers, Hispanics and Millennials-to create strong growth in both owner and rental housing markets over the next decade."
The report said household growth will include:5.5 to 5.7 million more Hispanic households in 2024 than in 2014;3.4 to 5.0 million more non-Hispanic White households;1.8 to 1.9 million more Asian households;2.4 million more African-American households; and730,000 to 890,000 more "other" households.
MBA said growth will be driven by Baby Boomers, with 12.3 to 12.9 million more households age 60 and over in 2024 than there are today. Millennials will also be a key component of growth raising the ranks of households age 18 to 44 by 4.1 to 5.1 million.
"When it comes to starting new households, age 35 is the new 25, as younger Americans are spending a longer time in school and delaying major life events like getting married and having children," said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. "As Millennials age and create more housing demand, these long-term social trends will mix with demographic changes and the waning hang-over from the Great Recession with a net outcome of increased demand for housing."
The study notes the lower end of the projection is the result of MBA analysis of demographic trends if sex-, age- and race-specific household formation rates remain at low 2014 levels. The upper end of the projection is the result of MBA analysis of sex-, age- and race-specific household formation rates adjusted to account for historical averages and economic and societal trends. At the upper end, this results in a growth rate of 1.6 million households per year. which would make the next decade one of the strongest in housing in U.S. history. Boosted by the aging of the population, the aggregate homeownership rate could rebound to between 65 and 66 percent.
"Household formation has been depressed in recent years by a long, jobless recovery," the study said. "Favorable economic and demographic trends will combine to create strong growth in both owner and rental housing markets. The precise mix will depend on the degree to which consumer choices, the relative cost of owning vs. renting and government policy's impact on access to credit favor one or the other."
By 2024, MBA said, demographic and economic changes "will bring what could be one of the largest expansions" in the history of the U.S. housing market. "Averaging 1.6 million additional households per year, housing market growth over the next decade would be among the strongest the U.S. has ever seen."
A link to the study can be accessed at http://mba.informz.net/MBA/data/images/15292_Research_Growth_White_Paper.pdf.