US housing in double-dip as BabyBoomers age

US house pricesMay11.pngUS house prices fell 4.2% in Q1, and have entered ‘double-dip’ territory, having fallen below March 2009 levels, according to the S&P Case-Shiller Index. They are now back to mid-2002 levels. Further falls are more or less inevitable. S&P suggest the ‘shadow inventory’ of homes is now 52 months at current sales rates, up from 49 months in December 2010.

There are also clear signs that Americans no longer regard housing as a good long-term investment. As the chart from the New York Times shows, home ownership peaked at 69.2% of the population in 2004. It is now down to 66.4%.

The great rally in home ownership came during the 1990’s. It coincided with the period when all US BabyBoomers (those born between 1946-70), were in the 25-54 age group. This is when people have most need to buy a house, as they marry, settle down, and have children.

Now, of course, the Boomers are ageing, and the generation behind is too small to easily replace their buying power. We discuss this issue in chapter 2 of our new eBook, Boom, Gloom and the New Normal, to be published at the end of this month.

This downward trend has very serious implications for chemical demand. As the average BabyBoomer is now 53 years old, home ownership levels may well continue to decline. In turn, this implies housing is most unlikely to return to its boom status anytime soon.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. 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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