Home sales silver lining: immigrants set to drive up demand
Homes sales have taken a beating in this recession. But the growth of the immigrant community should result in more home buyers, according to a Harvard study.
Here's one bright spot in the housing market: Demographic trends suggest that the US will have many new home buyers in the coming decade.
That's one core conclusion of a report released Monday by Harvard University's Joint Center for Housing Studies.
In the next 10 years, "household growth should match the 12.5 million" level seen during the decade from 1995 through 2005, according to the report, which the research center issues once a year. That should be the case even if immigration runs at a relatively slow pace.
A key reason: Immigrants and their native-born children who are already in the US are filling out the ranks of the "baby bust" and "echo boomer" generations, so that each of those groups will now rival the baby boom generation in size.
All this doesn't mean that US home prices are poised for another boom in the near future.
Unemployment remains high in most cities, with the national jobless rate near 10 percent. And some states still have a very large overhang of homes heading into foreclosure. Overall, home prices fell in much of the nation during the four quarters ending in March 2010. (See map attached to this news report.)
But the demographic factors reveal some light in the housing-market tunnel.
"Even if immigration falls to half the Census Bureauâ€™s currently projected rate, household growth will still average about 1.25 million annually," says the study, conducted by multiple Harvard researchers.
They say construction levels could return to a strong level of 1.7 million units per year or more.
It may take a while before lots of unemployed construction workers get to pick up hammers again. The pace of residential construction is still way below its 2007 level.
In fact, the details of the report send mixed signals for housing:
- Current homeowners have lost lots of wealth. Americans have more than $6 trillion in equity in their homes, according to one chart. But that's down roughly 50 percent from the peak level in 2005, and brings inflation-adjusted housing wealth back to where it stood for much of the period from 1985 to 1997.
- Younger generations will fuel demand. Due to immigrants and their children, the so-called baby-bust generation (born in 1966-85) nearly outnumbers the baby-boom generation, the report says. The echo-boom generation is also moving toward home-buying age. Boomers themselves are expected to boost demand for senior housing. Despite the recent home-price declines, many older owners still can sell at a gain because they bought their homes years before the boom and bust.
- Rising home prices hinge on incomes, not just numbers of people. Real incomes for many Americans have been stagnating. And racial minorities, who make up a growing share of the population, often have lower incomes than whites. Still, the report says that among householders aged 25 to 64, "second-generation Americans typically have higher household incomes than both foreign-born and other native-born households of all races and ethnicities."