Real Estate

Housing dependent on young, struggling Americans

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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