3 Charts That Show the Future of American Housing Demand
U.S. homebuyers are beginning to emerge from their overpriced rentals and parents’ houses to move into a home of their own, according to a recent report from the Mortgage Bankers Association (MBA). The pent-up demand for housing comes after homeownership levels reached their lowest level in almost 50 years during the second quarter of 2015.
The upcoming decade is predicted to be one of the strongest in U.S. housing history as household formation has been depressed in recent years by a long, jobless recovery and a lull in the growth of the working-age population, according to Lynn Fisher, vice president of Research and Economics for MBA.
By 2024, 14 to 16 million new households will be created with as many as 13 million of those being owners and as few as three million as renters, according to the MBA report.
So, who will make up these new households?
Over the next decade, three demographic groups will help drive one of the largest expansions in the history of the U.S. housing market – Baby Boomers, Minorities and Millennials.
The report explains the growth in the numbers of households headed by those age 60 and older and age 45 and younger and will be mitigated by declines among households age 45 to 60. Growth among the Baby Boomer generation will continue to be primarily among non-Hispanic whites, as will the declines among households age 45 to 60. Meanwhile, minorities will drive growth among Millennial households and will positively impact demand in every age group.
As the American population becomes both older and more diverse in the decade, the demand for alternative types of housing will increase. According to the Joint Center for Housing Studies of Harvard University’s (JCHS) The State of the Nation’s Housing report, the existing housing supply is unprepared to meet the needs of the large and growing senior population. The research states many older adults live alone, have at least one type of disability and have limited resources to pay for suitable housing. As a result, the demand for housing that is affordable, accessible and provides a social connection will increase.
Millennials (born 1985–2004), one of America’s most diverse generations, will become a key driver of housing demand, according to JCHS. The group is also driving the increase in racial and ethnic diversity. The minority share of this generation is already at 45%, significantly higher than the 40%share among Gen-Xers and 28% share among Baby Boomers.
The growing diversity of U.S. households is helping drive demand for alternative types of housing that addresses a broad range of cultural preferences. For example, minority households are more likely to be multigenerational, suggesting increased demand for larger homes that accommodate these family groupings, according to JCHS.
The diversity of buyers looking for a home over the next decade also represents a need to work with a mortgage lender that offers a variety of home lending products. At Castle & Cooke Mortgage, we can help find the right home financing to meet borrowers’ unique needs. Click here to find out more about our loan options.