By Dees Stribling, Contributing Editor
The U.S. housing market has had a rough decade, but according to the Mortgage Bankers Association, time is on its side. The most recent recession depressed household formation, but a new study released by the organization this week asserts that household formation, and thus the demand for residential real estate of all flavors, will rise significantly during the next 10 years, buoyed especially by strong demographics. The exact mix of rental and for-sale will depend on consumer choices—such as whether Millennials really have eschewed for-sale housing in great numbers—as well as the cost of owning vs. renting, and other factors.
The report is decidedly optimistic: “By 2024, demographic and economic changes will bring what could be one of the largest expansions in the history of the U.S. housing market—15.9 additional households.” Naturally, the growth isn’t going to be spread evenly among the age cohorts. Unsurprisingly, household growth among people 45 and younger will be strong. Less anticipated with be the rapid growth in household formation among people over 60, as the later end of the Baby Boom ages. There will, in fact, be 20 million more people age 60 and over by 2024 than there are now.
Projecting 10 years out is tricky business, so the MBA hedges a bit. Even if household formation rates retain at 2014 levels, which are relatively low, that will still result in 13.9 million new households over the next decade. Of those, if 2014 trends hold, there will be 10.3 million owner-households and 5.6 million renter-households by 2024. That doesn’t mean that the percentage of U.S. households that own their homes will be that much greater, however: the MBA predicts the rate will be 64.8 percent, only a little more than now.
The report also predicts that the behavior of Millennials will eventually come more to resemble their parents and grandparents. That is, they’ll have their own children. But there will be one important difference: Millennials are getting a later start on familiars than did earlier generations. “For many Millennials, it appears that 35 is the new 25,” as the report puts it.