MBA Predicts Nationwide Surge in Housing Demand

As the real estate market has steadily climbed in the bay area, the question is always…how long with the expansion last?  As always, the job market in the local region continues to support our strong economy, but how is the rest of the country doing..and what is the countries overall future real estate prognosis?  I'm not an expert for this question, so I looked to an entity that is.

A recent report released by the Mortgage Bankers Association forecasts a huge surge in housing demand over the next 10 years, with somewhere between 13.9 and 15.9 million additional households expected to form by 2024.  If the projections made in the report were to play out, we would be looking at one of the strongest housing markets in U.S. history.

The MBA's report claims that the surge in new household formation - and the resulting spike in demand - will be driven primarily by Hispanics, baby boomers, and millennials.

"Household formation has been depressed in recent years by a long, jobless recovery and by a lull in the growth of the working age population," said Lynn Fisher, MBA's vice president of research and economics. "However, improving employment markets will build on major demographic trends - including maturing of Baby Boomers, Hispanics and Millennials - to create strong growth in both owner and rental housing markets over the next decade."

The millennial demographic has been slow to break into the housing market (as owners), as many have spent a lot of time in school, and have put off major life events like getting married and having children.  But as more and more millennials head into their 30's and onward, it is widely expected these trends will shift in favor of increased household formation.  The MBA report predicts that millennials - which they describe as ages 18-44 to account for 10 years of aging - will form 4.1 - 5.1 million new households over the next ten years.

What's interesting to note, is during the early 1970's, when a large portion of the Baby Boomers were in their mid-20's (prime renting years), we saw the biggest multi-family construction boom in the country's history.  In the late 70's - when that same demographic matured, started families, and began buying homes - we saw one of the country's biggest single-family construction booms.  So if history is any indicator, as the millennial generation matures, the resulting increase in single-family demand could lead to a similar construction boom.