[ajax-data]{"title":"","body-class":["article-template-default","single","single-article","postid-1008"]}[/ajax-data]

Are Millenials Killing the U.S. Housing Market?
August 27, 2018

Are Millenials Killing The U.S. Housing Market?

 

The housing market continues to disappoint: Housing starts grew just 0.9% in July from the prior month. Rather than a mere aberration, this could signal the emergence of a bearish “new normal” in housing. Why? A slowdown in the growth rate of the adult population is one factor. The less obvious trend is behavioral: Today’s young adults are no longer rushing to set out on their own—and their parents are no longer yearning for an empty nest. Barring a drastic reversal in this trend, the housing market will have to cope with sustained slow growth for years to come.

America remains mired in by far the weakest housing market of the postwar era. New housing starts over the last 12 months weigh in at a SAAR of +1.2 million. That’s barely half of where it stood at the peak of the last business cycle. And, in fact, it is lower than at the peak of any business cycle going back almost all the way to World War IIHistorical data on the U.S. housing stock reveal that even the America of the 1950s outbuilt the America of the 2010s.

Are tough times ahead for the U.S. housing market?ISTOCKPHOTO

What makes this trend truly remarkable is that America today has a much larger population than in earlier decades. In 1972, for example, America built twice as many houses—even though our adult population back then was only 57% as large as it is today.

One widely recognized demographic driver is the decline in the growth rate of the adult population over the last several decades. America is a demographically mature society, with a gradually declining total fertility rate. This must lead, over time, to a similar decline in the number of new adults who come of age each year relative to the old adults who pass away each year.

Of course, this decline was “put on hold” for roughly 30 years (1980-2010) as the large Boomer generation worked its way into and through adulthood. It was also temporarily neutralized by immigration, which rose from the 1970s through the 2000s. But currently—with birthrates resuming their long-term decline, with Boomers entering their high-mortality age brackets, and with net immigration again falling—the downward trend is reasserting itself.

 

Author: Neil Howe

Source: Forbes Online


Share this article: