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June 2014

Household Growth Could Translate to Boosts in Homeownership Rates

But Surveys Yield Conflicting Data

By NWREporter

June 2014

Housing's critical role in the U.S. economy and in communities is the focus of much of the research and analysis at Harvard University's Joint Center of Housing Studies. In addition to its signature report, The State of the Nation's Housing, JCHS issues projections and research findings on various housing-related concerns.

Recent reports of particular interest to residential real estate professionals discuss new household projections, a major driver of housing demand.

The JCHS 2013 household projections anticipate substantial growth in minority, senior, and single-person households in the coming decades. Minorities are expected to account for just over 76 percent of all household growth whether using low- middle- or high-projections for the 2015-2025 time period. Hispanics alone will account for 40 percent of total household growth during the same timeframe according to JCHS projections.

Growth in senior households (age 65 or older) is expected to range from 81-to-91 percent of the net change in households. Two categories of households, single-person and married-without-children will together comprise about three quarters of all household growth in the coming decade.

The same report includes a homeowner and renter projection scenario, with an analysis of how demographic changes in the composition of households may influence future homeownership rates.

Analysts at JCHS expect changing demographics will be a positive influence on the overall homeownership rate through about 2025. After that time, "The upward influence of the aging of the population gives way to greater downward pressure from young adult and minority household growth," the researchers stated.

Authors of the report on household growth caution the data "should be considered baseline projections and not a growth forecast." Favorable economic conditions could contribute to increased rates of household formation, while other factors could hamper economic opportunities and result in decreases.

JCHS researchers also analyzed the most recent Housing Vacancy Survey (HVS), released earlier this year by the Census Bureau. Commenting on that much anticipated survey, Research Manager Dan McCue called the results "disappointing, if not somewhat confusing." Elsewhere in his report, he called the discrepancies in the surveys "troubling."

The HVS reported annual household growth of just 448,800 in 2013, a 48 percent drop relative to 2012. That total marked the lowest annual household growth measure since 2008, during the Great Recession.

Graph
Source: US Census Bureau, Housing Vacancy Survey

McCue described the HVS figures "puzzling," and noted they were contrary to assorted other market indicators that had been painting a more positive picture for housing overall. Among trends he mentioned were:

  • The much higher 1.375 million annual growth reported in the 2013 Current Population Survey Annual Social and Economic Supplement (CPS/ASEC);
  • The same, steady increase in jobs in 2013 as during the previous year; and
  • Increased momentum in the housing market, including a further decline in vacancy rates, an increase in new home sales, and an increase in housing construction during the year.

Also concerning were fundamental differences between the CPS/ASEC and HVS estimates of households.

"With its household estimates pinned to estimates of the housing stock, the surprisingly low HVS household growth estimate may be at least in part due to overly low estimates of growth in the total housing stock," McCue stated. He noted slow and steady rises in total housing stock estimates used by the HVS that were concurrent with the Census Bureau's New Residential Construction surveys showing "a significant upturn" in the number of completed housing units in 2012 and 2013.

"In order for the HVS estimates of changes in the housing stock to be accurate, this would suggest a surge in demolitions that roughly offset the recent surge in new construction, which seems unlikely," McCune remarked. 

The Harvard Joint Center for Housing Studies helps leaders in government, business, and the civic sectors make decisions that effectively address the needs of cities and communities. Through research, education and public outreach programs, it advances understanding of housing issues, informs policy and helps train and inspire the next generation of housing leaders.