Two long-term housing forecasts released in recent weeks paint a bright future for America's housing industry over the next 10 years. But they also cast shadows of concern on the outlook for many prospective home buyers. Both reports—one from the Homeownership Alliance and the other from Harvard University's Joint Center for Housing Studies—predict that the demand for housing over the next 10 years will result in one of the strongest production periods in decades for home builders. Delivering affordable homes where they are needed, however, will remain one of the industry's greatest challenges. The dichotomy is already becoming one of the top social and political issues of the decade to come.
For home builders, the decade ahead is filled with the promise of demand. The HOA study prepared by five top housing and mortgage economists estimates that during the next 10 years, household growth will require about two million new housing units a year. The JCHS' “State of the Nation's Housing” study similarly projects that between 2005 and 2015, housing production could top 19.5 million units.
What's driving these numbers are recent upward revisions in the rate at which new households are being created—now estimated at 13.3 million from 2005 to 2015—and more fundamentally, what might be called the “immigrant factor.”
The impact of immigrants on America's housing market is widely documented, yet remains largely underappreciated, in part, because even the U.S. Census Bureau has underestimated their number. Recently released figures from the 2000 Census show that one-third of America's population growth in the 1990s came from individuals—some 12 million—born outside the U.S. Looked at another way, the influx of immigrants in the South and Midwest in the 1990s was 150 percent higher than in the 1980s, 90 percent higher in the Northeast, and 62 percent higher in the West. The Census Bureau estimates that between 2000 and 2003, 4.2 million foreign-born individuals entered the U.S.
The surge in foreign-born population, along with indications that many immigrants aren't being counted, was reflected in a Census Bureau report released in March. In it, the Census Bureau boosted by 6 percent its “middle series” projection of annual net immigration to 893,000 and reaffirmed that net immigration might run as “high” as 1.7 million annually through 2013.
The importance of immigrants on the complexion of future housing demand can be seen on several fronts. For one, the immigrant inflows of the past decade have skewed the age structure of America's population—filling in much of the trough of 15- to 34-year-olds that existed between spikes of baby boomers and their offspring. Currently, 20 percent of Generation X (ages 24 to 34) is foreign-born compared to 12 percent of the overall population.
Secondly, this influx is creating a population of young adults that is much more racially, ethnically, and culturally diverse than middle-aged and older home buyers. For builders, that means that lifestyle and psychographic marketing is about to get a lot more complicated.
The flip side of immigration is the growing number of households struggling to overcome a variety of economic barriers. While the HOA study foresees home-ownership rates climbing above 70 percent over the next decade—with flexible mortgage products and rising incomes—hardships will remain for many Americans who can't find affordable homes near work. The JCHS study notes that 13 percent of all U.S. households (including 2 million single-mother households) spent half or more of their incomes on housing in 2001. Another report issued recently by the National Housing Conference's Center for Housing Policy notes that the home-ownership rate of working families with kids—though somewhat improved since 1991—nevertheless eroded from 62.5 percent to 56.6 percent between 1978 and 2001.
Clearly what's needed in the decade ahead is more creative and constructive ways of working with land-use officials and more effective public-private partnerships. Builders and developers have both a tremendous opportunity and a rising burden of responsibility to foster affordable housing solutions as they clearly stand to benefit most from the coming decade of housing demand.