By Kerri Panchuk kpanchuk@housingwire.com
• March 6, 2012 - 5:47pm
The Echo
Boomers, better known as children of Baby Boomers and Gen X, are the future of
the housing market. Unfortunately, they continue to struggle financially
creating uncertainty in the real estate market, the Bipartisan Policy Center
said.
The organization,
which brings together bipartisan lawmakers, released a study called
"Demographic Challenges and Opportunities for U.S. Housing Markets."
The report suggests demographic trends are potentially a boon and a bust for
today's housing economy.
As boomers age
and look to downsize, younger Americans are seeking opportunities to create
homes. The report says growth in the 65-plus population will create new demand
for "affordable, accessible housing." Meanwhile, echo boomers over
the next 20 years have the potential to create the demand needed to stimulate
housing. The only problem is their demand remains contingent on economic growth
trends and policy tools.
The report says
between 1975 and 2000, the United States saw two periods of prolonged increases
in median household income, but a shift occurred in 2000, impacting younger
generations.
"Since
2000, however, the real median household income has hovered between $68,000 and
$71,000, ending the decade just below $68,000 — approximately equal to the 1998
median household income in real dollars," the report said.
The study added
that rising income levels are inextricably linked to the ability to buy homes,
creating a demographic dilemma as more young Americans struggle to form
households.
Evidence of
those struggles include more younger Americans living at home and increased
rental trends among Americans in their thirties.
"First,
working-age adults 35 years and older either have shifted from owning homes to
renting or are delaying the transition to homeownership," said the
Bipartisan Policy Center. "Second, Echo Boomers are maturing into
adulthood, entering the housing market and searching for rental housing."
"Even with
higher levels of rental-housing demand from 2010 to 2020, however, the most
pessimistic demographic scenario developed here would result in national
homeownership rates above 60 percent between now and 2030," the report
concluded.
The report says
22% of 18- to 24-year-olds in 2010 lived in poverty and the median income of
people aged 15 to 24 dropped 9% between 2009 and 2010. And of the 25- to
34-year-olds who moved in with family and friends to save money about half
would have lived below the poverty line otherwise.
The lowest
income quintile in 2009 was for those making $11,550 per year, which is down 9%
from 1999 and only 10% above 1975 levels in real dollars. The second lowest
quintile had income levels below $30,000, which is 7% lower than
inflation-adjusted income from 1999 and 13% higher than 1975 levels.
Looking ahead,
the Echo Boomers born after 1981 are expected to be the saviors of the housing market, but their financial agility entering adulthood could slow them down.
"Young
adults carry high levels of credit card and student loan debt; even young
people who already had formed households had higher debt loads in 2009 than
people of the same age 10 years earlier. Rates of marriage declined in the
2000s from 8.2 per thousand to 6.8 per thousand," the report said.
In addition,
baby boomer households also lost wealth in the recession, which means younger
people can no longer count on building off their parents financial
wealth.
While the main
theme of the report stresses younger Americans opting for rental housing
longer, it also warns rents are getting high and a recovery with increased immigration
could push multifamily housing prices beyond levels of affordability.
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