In their ongoing effort to identify factors that drive the home financing industry, the Mortgage Bankers Association (MBA) has been busy analyzing future borrowing trends. The MBA’s recently released report, “Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households” contained some exciting news.
According to the report, it is estimated that, “Between 13.9 and 15.9 million additional households will be formed by 2024.” That indicates that the upcoming decade could be the strongest 10-year span for the nation’s housing industry. The report’s findings credited the future demand in housing to growing populations of Hispanics, Baby Boomers, and Millennials.
Significant growth is expected to take place in both the rental and owner-occupied housing market. In looking at the three groups who are predicted to steer this growth, the MBA believes that Baby Boomers will be the main influence. The Neilson firm, which studies consumer trends, concurs. A Neilson report from January 2015, revealed that, “Forty percent of households in the U.S. are headed by someone between the ages of 50 and 69, and this group holds 54 percent of all household wealth.”
Even though the majority of Baby Boomers are choosing to “age in place,” Neilson’s analysts speculate that in the coming years they will account for “$1 out of every $4 spent on a new home purchase or rent over the next five years.” This group also was not as negatively impacted by the last recession as other segments of the U.S. population. However, many did suffer a decrease in their net worth, which has caused them to put off retirement and the typical down sizing to smaller homes. Because many have homes that have been paid for, the idea of taking on another mortgage right now is being put on the back burner. Neilson’s study goes hand in hand with the MBA’s findings. Baby Boomers are retiring later and planning to address their housing needs, whther they downsize or upsize (and many plan to) in the next 5 to 10 years.
Lynn Fisher, the MBA’s Vice President of Research and Economics, observed that, “Improving employment markets will build on major demographic trends, to create strong growth in both owner and rental housing markets over the next decade.”
It seems that the group that should be leading the way for the latest crop of new first-time home buyers — the Millennials — have been waiting longer than previous generations to settle down, start families and make home purchases. Jamie Woodwell, who is the Vice president for the MBA’s department of Commercial Real Estate Research, explained that within that age group, 35 could be viewed as the new 25. As they collectively age-over the next 10 years, the demand for housing will quickly speed up.
In their effort to realize the American Dream, millions of Hispanics are carefully saving and planning to become future homeowners. The real estate analysis firm Movoto, reported in 2012 that by 2020, first-time Hispanic homebuyers will account for 50 percent of all home sales. As the economy strengthens, their buying power increases.
Movoto’s analytical team reviewed several national housing surveys, which contrasted the views regarding home ownership between Americans and Hispanics:
- 56% of Hispanics believe that owning a home is a sign of success-compare that to 32% of Americans.
- 68% of Hispanics think owning a home is a sound economic move compared to 57% of Americans
- 73% of Hispanics feel that home ownership leads directly to the ability to build family wealth and establish security for future generations compared to 57% of Americans.
The MBA study included the following projections:
- 5 to 5.7 million more Hispanic households in 2024 than in 2014
- 4 to 5.0 million more non-Hispanic White households
- 8 to 1.9 million more Asian households
- 4 million more Black households
- 730,000 to 890,000 more “other” households
Such a large demand for housing can only be viewed as good news! The nation’s housing industry represents a major portion of the nation’s economy and employees millions of Americans. Furthermore, homeowners are more prone to being directly involved in improving their communities!
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