US housing markets will never be the same again

US housing Jun14aUS housing markets will never be the same again.  That’s the conclusion of a new analysis by the blog for ICB.

The picture above of a typical US family from the BabyBoom days tells the story:

  • The number of US babies born between 1946 – 64 increased by 50% versus the previous 18 years
  • 4 million were born each year – and when they reached adulthood they then began to have children themselves
  • Inner city race riots meant a ‘flight to the suburbs’ developed
  • So demand soared for single family homes in a nice development with good schools
  • If prices were too high in your first choice, you drove 10 miles down the freeway and paid $10k less

So demand suddenly switched from multi-family apartment blocks to single-family homes.  And people needed to buy plenty of new cars so that they could get to work and provide a taxi service for the kids.  Large out-of-town shopping malls were also essential, so you could fill up the car at weekends with everything you would need for the next week.

But now those days are over.  Not only were fewer babies born after the Boom, but fertility rates have halved since 1955, to just 1.7 babies per woman.

Instead, the key demand driver is the aging population.  Home ownership rates are in long-term decline, back at levels last seen in 1995.

So demand for suburban housing is never going to be the same again.  Driving habits change with age, and as people get older, so they drive a lot less.  Equally important is that city centres are now becoming increasingly attractive as places to live.  As a result, a ‘flight back to the cities’ is well underway.US housing Jun14b

None of this is rocket science.  But we seem to have got out of the habit of thinking about people as being the centre of demand.  Yet we all know older people, maybe our parents or friends or work colleagues.  All we have to do is to apply the learning from our own knowledge to understand what the future holds.

Please click here to download a free copy of the new ICB article.

And please click here to view the YouTube video interview with ICB deputy editor, Will Beacham.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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