Boomers, Minorities to Drive Future Housing Demand

Sorohan, Mike msorohan@mba.org

October 23, 2015

SAN DIEGO--Nearly 16 million households are expected in the U.S. housing market by 2024, which Mortgage Bankers Association economists said should lead to much greater demand for both renter- and owner-occupied housing. 

MBA Vice President of Research and Economics Lynn Fisher said with an average of 1.6 million additional households per year, housing market growth over the next decade could be among the strongest the U.S. has ever seen.  

"Just the sheer change in the number of people are driving the creation of new household formation," Fisher said here at the MBA 102nd Annual Convention & Expo  

In August, MBA released a research paper, Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households, showing the housing demand surge will be driven by Hispanics, Baby Boomers, Asian-Americans and Millennials (http://mba.informz.net/MBA/data/images/15292_Research_Growth_White_Paper.pdf).  

The report said household growth will include 5.5-5.7 million more Hispanic households in 2024 than in 2014; 3.4-5.0 million more non-Hispanic White households; 1.8-1.9 million more Asian households; 2.4 million more African-American households; and 730,000-890,000 more "other" households, including Asian-Americans. Growth will be driven by Baby Boomers, with 12.3-12.9 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 4.1-5.1 million.  

"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."  

The U.S. 18 and over population stood at 237 million in 2014; by 2024, that number jumps to 261 million, an increase of 24 million. Each age group, Fisher said, has its own preferences for housing, with Hispanic households driving household formation in each age group.  

To that point, MBA Vice President of Commercial/Multifamily Research Jamie Woodwell said even taking out the Hispanic demographic, household growth would increase among all age cohorts. He added that the Millennial generation has already edged its way into household formation and will continue to have a major impact over the next decade.  

Populations are shifting, Woodwell noted, as are their preferences. "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," he said.  

But without question, Fisher said, the Hispanic population, which will grow older over the next decade, will drive the overall homeownership as younger Hispanics move from rental households into homeownership.  

Fisher noted that 2014 was a "low ebb" in the homeownership rate, reaching a 20-year low. Under conservative scenarios, the study projects 10.3 million new owner-occupied households over the next 10 years and nearly 5.6 million renter-occupied households. Under more generous scenarios, the number of owner-occupied could increase to 12.7 million, net.  

The result? The homeownership rate could increase back up to 65 percent under conservative scenarios and 66 percent under the high-end estimates.  

"When we think about homeownership, we tend to think about single-family; and when we think about rental, we tend to think about multifamily. That's not necessarily the case," Woodwell said. "As we talk about changes in the homeownership rate going forward, it appears that a lot of the shift would still be driven by single-family housing, but not necessarily just single-family ownership."  

"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 report said.

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