Hello and thank you for your question.
Terry McDermott, distinguished lecturer at the Virginia Commonwealth
University, gave a talk on February 25 of this year that connects the
demographics of the U.S. population with mortgage demand. The title
of his talk was Real Estate: A Prism of Community Demographics and
Future Business Trends. Here are some excerpts:
"The U.S. population will continue to expand at a moderate pace,
reaching 310 million by 2010, and 340 million by 2020. This bodes well
for housing because population trends early in the 21stCentury will
support strong housing demand.
* Overall, the numbers translate into 2.7 million more people per year
... that's more than 13 times the current population of Richmond.
* Between 1.1 million and 1.2 million new households, representing
potential new homebuyers, will form in each year of this new decade.
* Baby Boomers, born between 1946 and 1964, will be the prime market
for trade-up, upscale, and vacation homes ... they control about 70
percent of the nation's wealth and 50 percent of all discretionary
income.
* Their children Generation Y, or the Echo-Generation will be the
main source of future homeownership growth, particularly as they begin
looking for starter homes after 2010 ... and as they become key
candidates for the trade-up market after 2020.
* Married couples without children and single people will represent
the fastest growing households through 2010, with each growing by 18
percent.
* But population growth isn't the only factor contributing to housing
demand ... age distribution and its impact on household formation is
equally important.
* We expect 7.6 million people between the age of 25-34, and 6.7
million aged 35-44, will represent the greatest growth in
homeownership through 2010.
* Also, a larger percentage of American households namely Baby
Boomers will reach the peak earning years in this decade.
* Overall, because of the increases in population, homeownership will
successively hit new records and will surpass 70 percent by 2010.
Keep an eye on minorities and immigrants. They're critical to the
housing market. Quite frankly, they're the reason real estate has
performed so well during this last recession.
* The biggest source of household growth in this decade will come from
minorities and immigrants.
* Minorities defined as people other than non-Hispanic whites will
account for 64 percent of all new households.
* Between 1993 and 2000, they accounted for 44 percent of
homeownership growth, while accounting for 25 percent of all
households.
* By 2010, blacks will account for 19 percent of household growth;
Hispanics, 38 percent; other non-whites, 37 percent; and whites, only
5 percent.
* Today, while minority homeownership rates are still far below that
of whites, which stands at 74.4 percent ... it's 48.1 percent for
blacks, 48.8 percent for Hispanics, and 53.2 percent for other
minority groups ... we cannot ignore these groups.
* NAR sponsored the first national HOPE ("Home Ownership Participation
for Everyone") Awards last year to recognize outstanding contributions
to minority homeownership, to focus public attention on this issue,
and to convince policy-makers that the time has come to place a higher
priority on creating parity in homeownership.
The influx of immigrants to America has had a particularly positive
impact on the nation's GDP and housing growth trends that, going
forward, are expected to continue.
* The foreign-born population now accounts for 20 percent of the
growth in homeownership.
* During the 1980s and 1990s, large numbers of immigrants nearly 17
million entered the U.S.
* It usually takes several years before recent immigrants make the
move to homeownership.
* But the longer an immigrant household remains in this country, the
more likely it is to make the transition to homeownership.
* In fact, there tends to be a significant jump in homeownership rates
by foreign-born naturalized citizens after they've lived here six
years.
* In 2000, the rate of homeownership by foreign-born naturalized
citizens reached an impressive 66.5 percent ... it's 68 percent for
the nation as a whole.
The creation of these additional households will require more home
construction as well as favorable economic conditions to lure
potential homebuyers.
* NAR projects 1.5 - 1.6 million housing starts a year between 2000
and 2010.
* About 1.2 million will be for single-family housing starts and the
rest for multifamily starts, which mainly consist of rental units.
* At the same time, new-home sales will average 900,000 a year over
the next decade ... new home sales include only single-family homes;
they exclude single-family housing starts that are owner-built houses
and those that are built to be rented.
* Existing-home sales will reach 5.9 million annually by 2010, up from
5.2 million.
* So far, economic conditions look favorable, mainly because
controlling inflation is the number one goal of Central Banks
worldwide, including the Federal Reserve.
* Low inflation translates into low mortgage rates.
* And historically low mortgage rates help to enlarge the pool of
eligible homebuyers.
* For every 1 percent drop in mortgage rates, about 3 million more
households have the income that's necessary to buy a median-priced
home.
* Going forward, mortgage rates in the next decade will be favorable
hovering at historic lows of 7.0 7.5 percent for most years."
McDermott Notes
http://www.realestate.bus.vcu.edu/McDermott_Notes.pdf
A recent study of demographic trends emphasizes how immigration and
merging of disparate populations affects demand for housing and
mortgage loans:
"Compounding the problem in many small towns is the increase in real
estate activity driven by an influx of urban dwellers seeking a piece
of tranquility. Unfortunately, this type of market activity further
exasperates working class people attempting to locate affordable
housing within their communities. The shortage of affordable housing
is not unique to rural America or Indian Country. The problem can be
traced to the changing demographics that are driving the real estate
markets. During the nineties industry analysts misread the changing
demand side of the housing equation. Large homebuilders were advised
to build with caution in anticipation of increased supply as a result
of baby boomers seeking greater liquidity going into retirement.
Divorce rates expanded the universe of buyers with a jump in single
parent households. The 2000 Census data indicated that large numbers
of immigrants from China, India, Mexico, and the former Soviet Union
have contributed to the strong housing demand."
Millennial Housing Commission Comments
http://www.mhc.gov/responses/128001.doc
Consider also the testimony of the National Association of Realtors:
"Immigration will continue to increase bringing new Americans to this
nation at a rate approaching that at the end of the 1800's. In 1990
Asian/Pacific Islanders accounted for just under 2 million households
while Hispanics headed about 6 million households. By 2010, the number
of Asian/Pacific Islanders and Hispanic-headed households will roughly
double to 4.3 million and 11.9 million, respectively.
African-American households will increase as well. In 1990, 10.5
million households were headed by African-Americans. By 2010,
African-Americans will head 14.2 million households.
The housing market for seniors will continue to grow. Currently, about
21 million households are headed by individuals over the age of 65. By
2010 that number will increase to over 25 million.
Generation X -- those persons born between 1965 and 1979 -- currently
head approximately 20 million households. By 2010 they will head about
28 million households and will be entering the market for trade-up
homes.
Generation Y -- those persons born after 1979 -- currently numbers
over 70 million people. By 2010 they will head about 13 million
households and will be the key first-time buyer market after 2010. By
2020 their impact will begin to be felt much more strongly, heading
over 40 million households and serving as the key trade-up market
after 2020.
Clearly, these population demographics will support strong housing
demand and the need for affordable housing opportunities. Yet, there
are ominous signs on the horizon that warrant urgent collaborative
attention to our nation's housing needs and demand clear and
compelling responses to strengthen federal efforts to assure adequate
supplies of decent, safe and affordable housing for America's
families."
Hearing to Examine Proposals to Promote Affordable Housing
http://banking.senate.gov/00_06hrg/062000/whatley.htm
There is a wealth of material available on the Internet to connect
demographics with demand for residential mortgages. Perhaps some of
the points raised in the foregoing material are more important to your
inquiry than others. May I suggest that you review the material cited
above, and then feel free to Request Clarification if you would like
any of these points clarified or expanded--I will be happy to provide
more information at your request.
I would appreciate it if you would hold off on rating this Answer
until I have a chance to provide you with anything further that you
need along these lines.
Search terms used:
mortgage demographics demand
mortgage demographics demand site:.us
mortgage demographics demand site:.gov
Sincerely,
richard-ga |
