By Michael Dey, Executive Vice President
Home Builders Association of Greenville
The challenge of understanding how demographics impacts the housing market is not in the assessment of what has happened, but in the assessment of what will happen.
A couple of years ago I looked at some of the causes of the current housing market crisis. Clearly easy access to financing, access that was too easy, was a major factor. However, in my opinion, the catalyst was demand, or lack of it.
From 2006 to 2009 the population at prime first-time home buying age was extraordinarily small. That is because that age group was born during the lowest birth-rate years since World War II: 1973-1976.
In my opinion lack of demand from people that had to buy a home was the catalyst that created the chain reaction that brought down the housing industry.
Unfortunately that first-time home buyer demand is still lower than normal and is probably a couple of years away from strengthening. Low demand is compounded with the fact that many people who should have been in the market place in the last couple of years have deferred buying homes because they either don’t have a job or are under employed, or they are not confident enough to enter the housing market at this time, or they are having difficulty qualifying for a loan, and perhaps a combination of the three. This one-two punch explains why the housing industry continues to “bounce along the bottom”: lack of demand.
Demand is coming, but where?
The question I am often asked when I present this data, and one that I have not been able to answer, is where will the next generation of first-time home buyers want to live? That is a very good question and one that is hard to answer; until now.
The professional planners and smart-growth advocates say future demand will matriculate toward more urban settings. I have generally agreed with that assessment and I have wondered if we don’t already have enough suburban housing to meet future demand.
However, analysis of 2010 Census data by demographer Wendell Cox demonstrates the opposite trend. According to Cox’s analysis, 1.8 million 25-34 year-olds moved to the suburbs during the last decade. At the same time, 1.3 million25-34 year-olds moved away from urban areas around the country.
There is a lot of speculation about why this has happened, but a member of the HBA staff who falls into that age group gave me the most plausible explanation for this trend: “we can’t afford to live in the city.”
No matter the explanation, the answer to where first-time home buyers will settle may be answered: where their parents settled when they bought their first home.