A new white paper from the Mortgage Bankers Association (MBA) predicts that demand for housing will grow significantly over the next 10 years as a result of population growth and shifting demographics.
The white paper draws on U.S. Census Bureau data to conclude that there will be about 15 million new households formed in the U.S. by 2014. How many of these households will be renters and how many will be homeowners depends on a variety of factors.
‘Favorable economic and demographic trends will combine [over the next 10 years] to create strong growth in both owner and rental housing markets,’ the white paper states. ‘The precise mix will depend on the degree to which consumer choices, the relative cost of owning versus renting, and government policy's impact on access to credit favor one or the other.’
The white paper analyzes the factors that will be driving future growth in household formation, particularly in terms of demographics. It looks at two possible scenarios: The first assumes that the rate of household growth will remain at 2014 levels over the next 10 years, and the second assumes that household formation will increase significantly from 2014 levels.
If household formation stays at 2014 levels, the U.S. will see 10.3 million additional owner households and 5.6 million new renter households over the next 10 years. However, if household formation increases, the U.S. could see 12.7 million owner households and 3.1 million renter households over the next 10 years, the MBA says.
The white paper also looks at the demographical factors that will drive growth in household formation in both scenarios. As one might expect, Hispanics will drive much of the growth in demand for housing over the next 10 years in either scenario.
‘Even if sex-, age- and race-specific household formation rates remain at low 2014 levels, demographic changes alone will mean an additional 5.5 million Hispanic households, 3.4 million non-Hispanic white households, 2.4 million more black households, 1.8 million more Asian households,’ the white paper states.
The information in the white paper should prove beneficial to mortgage lenders as they consider their future product offerings and marketing plans.
The MBA predicts that the U.S. homeownership rate has ‘bottomed out’ and will likely rise over the next 10 years.
As reported in July, the U.S. homeownership rate dropped to 63.4% – about the same level seen in 1967 – at the end of the second quarter, according to figures released by the U.S. Census Bureau. That's down from 63.7% in the first quarter and down from 64.7% in the second quarter of 2014, according to the report.
‘Given the current level and ongoing trend in relative costs of owning versus renting, it is unlikely that the homeownership rate will fall much further, and it is likely to rise,’ the MBA says in the white paper.
The MBA predicts that the aggregate homeownership rate will grow modestly, to just below 64.8%, by 2024.
‘To the degree the housing market in 2024 is stronger than in 2014, homeownership rates should respond,’ the white paper states.
Of course, there are so many things that can happen by 2024 â�¦
To view the full white paper, click here.