Household formation dropped to less than 1 million per year from 2005 to 2009, down from 1.2–1.4 million each year from 2000–05. According to the JCHS report, one of the primary causes was decreased immigration. Still, from 2003 to 2009, immigrants and minorities accounted for 74 percent of net household growth, the report says, outpacing growth in native-born white household formation. In 2007, minorities accounted for 35 percent of first-time homebuyers and 20 percent of repeat buyers, while immigrants made up 19 percent of first-time buyers and 12 percent of repeat buyers. Immigrants and minorities will continue to drive household formation, even if immigration declines.
If immigration rates reach those predicted by the census, household growth for the 2010–20 period could be about 14.8 million; if, however, immigration slows to half the census’ predicted pace, household growth would reach about 12.5 million. According to the JCHS report, both scenarios should support housing completions and manufactured home placements of, on average, 1.7 million to more than 1.9 million units annually from 2010 to 2020.
As both native-born and immigrant echo boomers age into adulthood and begin forming households, demand for apartments and smaller starter homes will increase in the next 15 years, the report says. Second-generation American echo boomers will play an important role in shaping future households and housing trends.
The baby boomers’ influence on housing trends will not subside, however. The oldest members of the generation have reached age 64, and millions more will follow on their heels. As they age into retirement and transition to different lifestyles, their housing needs and desires will change, and designers and builders will need to provide the kind of homes they’ll be interested in buying. Already the boomers are changing senior housing and retirement models. According to the report, demand for senior housing will spike in the next 10 to 20 years as boomers age, and the units built to accommodate that demand will be the housing stock available for future generations, making senior housing issues a top priority for industry and government. (Read more about boomers’ housing choices and needs.)
While new residential construction will regain its stability and begin to grow slowly over the next several years, home remodeling—which suffered less during the recession—is expected to recover more quickly. In 2009, home improvement spending fell 25 percent from its peak in 2006, but this was only about one-third as large as the drop in new construction. Government programs and tax incentives spurred remodeling to weatherize and improve home energy efficiency. The number of professional remodelers who have worked on energy-efficiency remodels and retrofits made possible by the energy-efficiency tax credits and incentives jumped from 39 percent in 2009 to 53 percent in early 2010. Remodeling spending tends to be largest after a home purchase, so as sales of existing homes increase remodeling should experience a rebound that continues through 2010.
According to the housing report and other economists, the nation’s existing housing stock offers the biggest opportunity for reducing energy usage and carbon emissions. From 1993 to 2005, the energy consumption per square foot of pre-1990 homes dropped by 21.6 percent—in part because of homeowner conservation efforts, but mostly due to energy-efficient home improvements. If all homes built before 2000 were improved to the efficiency level of post-2000 homes, overall residential energy consumption would decline by another 22.5 percent, the report says.
For more complete analysis, download the complete JCHS “2010 State of the Nation’s Housing” report.
For more coverage from CUSTOM HOME on the housing recovery, click here.