A LOOK INTO THE FUTURE
Imagine that you've gone back in time to 1915. The average price of a new home is $3,200 ($64,158 in 2006 dollars), there are 4.5 million people over the age of 65, and the nation's population has just passed the 100 million mark.
Five decades later, in 1967, the nation's population has doubled to 200 million. A new home is priced at $24,600 ($149,147 in 2006 dollars), and 19.1 million people are aged 65 or over.
Only 39 years later—in 2006—the population has increased by another 100 million. According to the Census Bureau, a typical new home costs $290,600, and a record 36.8 million people are 65 or over.
So what does this information mean to us?
First, the nation's population is growing rapidly, and the pace of growth continues to speed up. It took 52 years for the population to double from 100 million to 200 million but less than 40 years for it to grow by another 100 million to today's record of 300 million. And the Census Bureau estimates that the population will reach 400 million in 2043.
THE BOOM RESOUNDS You have only to look at the aging of the baby boomers to know how well our industry can respond to such demands. As the baby boomers grew up and began forming new households, they first drove multifamily construction to record levels, then focused the market on entry-level housing, and later demanded larger and increasingly luxurious trade-up housing.
And this generation will continue to have a profound effect on the housing market. According to “The State of the Nation's Housing 2006,” the annual report by the Joint Center for Housing Studies of Harvard University, “The growing population of older Americans will intensify demand for second homes, retirement communities for active older adults, and housing that provides personal care and other services for frail seniors.” It also notes that “older empty-nest households will fuel demand for higher-end, trade-up homes requiring little maintenance.”
THE RISING MINORITY But what will drive the “non–baby-boom” segments of the market, and what do we need to know to plan for the years ahead?
According to the Census Bureau, minorities—particularly Hispanics—will account for much of the population growth in upcoming years.
Already the nation's largest minority group with a population of 42.7 million or 14 percent of the total, Hispanics are also the fastest-growing minority group. Bolstered by significant immigration, the Hispanic population will rise to 102.6 million, or 24 percent of the population, by the middle of 2050, according to the Census Bureau.
And the Hispanic population is young, with a median age of 27.2 compared with 36.2 for the population as a whole. Moreover, almost a quarter of the nation's population under the age of 5 is Hispanic.
At 39.7 million, blacks, the nation's second largest minority group, make up 13.4 percent of the population. In 2050, the black population will stand at 61.4 million—or 15 percent of the nation's population—according to Census Bureau projections.
The homeownership rates in 2005 for Hispanics and blacks, at 49.5 percent and 48.8 percent respectively, lag significantly behind the homeownership rate for whites, which was almost 76 percent in 2005.
The Joint Center notes that “in large measure, the stubbornly wide homeownership gap reflects the rapid growth in young minority households. Because young households have lower homeownership rates than older households, they bring down the overall rate for minorities.”
Obviously, as the population continues to grow, the demand for new homes and rental housing will continue to grow. And affordability will continue to be a crucial element in the housing equation. But many of the customers we serve are likely to be different from those who have come into our sales offices and purchased our products in the past. It is also likely that the products they prefer will be different from those that dominate the market today.
Brian C. Catalde, PRESIDENT, NAHB WASHINGTON, D.C.
Learn more about markets featured in this article: Washington, DC.