Byline:
Matt Phair, HousingZone Contributing
A new report from the Urban Land Institute offers two key predictions from Housing in America for the decade ahead: home appreciation will slow considerably, to about 1 percent to 2 percent annually; and the current U.S. homeownership rate, now at 67 percent (a decline from the record high of 69 percent at the height of the housing boom) will fall further, to about 62 percent.
The report also cites four major U.S. demographic trends that will have a major impact on housing.
- Aging baby boomers (55 to 64 years old) – Although they are nearing retirement age, many will keep working out of necessity or by choice. Some will be forced to stay in their suburban homes until values recover. Those who are able to move will not choose traditional retirement locations or senior housing, opting instead for more mixed-age living environments that cater to their active lifestyles. Suburban town centers with a walkable urban “feel” will appeal to this group.
- Younger baby boomers (46 to 54 years old), now in or entering their prime earning years – This group will also face a tough time selling suburban homes, hampering the ability of these boomers to move. Because the recession has left many younger boomers with flat incomes and less home equity, their ability to purchase second homes will be greatly diminished, curbing prospects in general for the second home market. However, like their older counterparts, they will be drawn to more connected, compactly designed communities when they are able to switch houses.
- Generation Y – This tech-savvy generation has a population of about 86 million, more than the baby boomers. Gen Yers place high value on community; on places (either virtual or actual) to gather and share information, ideas and opinions. As they enter the housing market, they will be far less interested in homeownership than their parents were when they were young adults. (The recession, said McIlwain, has “tempered the interest of Gen Yers in buying their own homes and they will be renters by necessity or choice for years ahead.”) Despite having small incomes, Gen Y will gravitate toward walkable, close-in communities, choosing isolated housing on outer edges only as a last resort because it is the most affordable. Green, “net zero” homes powered exclusively by alternative energy will have strong appeal to this group.
- Immigrants – Already 40 million strong, the total population of legal and illegal immigrants in the U.S. has an even greater impact when the children and grandchildren are included as a factor. The tendency of immigrants to cluster, and to live in multi-generational households, suggests that they would prefer larger homes if they could afford them and if the homes were in neighborhoods with a strong sense of community.
All of these groups have some characteristics that reflect a desire to live in more pedestrian-friendly, transit-oriented, mixed-use environments that de-emphasize auto dependency, whether the location is urban or suburban. According to the report, economic and land constraints make it impossible for urban infill development to accommodate all the housing demand represented by all the demographic groups.
