US home ownership falls back to 1995 levels, as Boomers retire

Consumer demand

SHARE THIS STORY

US house May14US housing demand used to be a major support for the US economy.  But that was in the days when millions of new BabyBoomer families wanted to set up home in the suburbs and raise a family.  The rule was simple – if prices were high, you just drove 10 miles down the freeway to find a new suburb where home prices were $10k cheaper.

But today, the kids have left home, and the Boomers are entering retirement.  So they don’t need family homes in the suburbs any more.  And falling fertility rates mean there are not enough younger families to replace them.

Equally important, as the blog discussed back in February,  is that the real picture is actually worse than the headline view.  The highest fertility rates today are in the low-earning Hispanic and Black communities – which means the recent temporary recovery in home prices has simply made owning a home even less affordable for them:

  • Latest Census Bureau data shows only 46% of Hispanics, and 43% of blacks own their own home
  • By comparison, 73% of White non-Hispanics own their home

Thus it is really no surprise that home ownership rates hit a new low in Q1 at 65%.  This was back at the 1995 level – when the youngest Boomer families were still setting up home for the first time.

Equally, it is no surprise that the US economy finds it hard to grow at SuperCycle rates, as the New York Times notes:

  • Annual household formation halved to just 569k between 2007-2013, from 1.35m between 2001-2006
  • Residential investment as a share of the economy is around half its average post-War level
  • On its own, this has reduced GDP growth by around 2% compared to the pre-2008 period

Instead, the need for cheaper multi-family units continues to rise.  These are now 34% of total sales – a level not seen since 1984.  But it was common before 1975, when the oldest Boomer was only 29 years old.  As the Wall Street Journal notes:

“Growth in rental demand is combining with long-run demographic trends that are expected to continue to tilt U.S. home construction toward “multifamily” units, a category that includes everything from garden-style apartments to towering condominiums. The baby-boom generation is moving into retirement and empty-nesthood, prompting many to downsize to smaller quarters. The generations behind them, meantime, are having fewer children, later in life, so need less space.”

The impact of today’s demographic changes is fundamental to the potential growth rate for the entire western economy.  The reason is that today’s changing demographics ripple outwards.  Housing demand itself is key for other major industries such as autos and chemicals, as well as for employment itself.

The blog will therefore discuss these areas in more detail tomorrow.

 

PREVIOUS POST

China's PE imports jump 26% as credit bubble peaks

06/05/2014

Strange things are happening in China’s polyethylene (PE) market, as the c...

Learn more
NEXT POST

Ageing BabyBoomers slow housing, auto markets

08/05/2014

As promised yesterday, the blog today looks at the wider impact of the major cha...

Learn more
More posts
Smartphone sales continue their decline, whilst $25 smart feature phones open up new markets
04/08/2019

Global smartphone sales have now been falling for 8 consecutive quarters, since Q3 2017. They are no...

Read
Smartphone market decline begins to impact global stock markets
19/05/2019

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And Pre...

Read
There’s a great future for the European plastics industry in recycled plastic
05/05/2019

Europe’s plastics industry is under major threat from the growing legislative and consumer bac...

Read
$60bn opportunity opens up for plastics industry as need to eliminate single-use packaging grows
17/03/2019

150 businesses representing over 20% of the global plastic packaging market have now agreed to start...

Read
IKEA heads into the circular world with furniture subscription trial
10/02/2019

“Once upon a time, Granny and Grandad used to go to a large shop on the motorway to buy their ...

Read
Fed’s magic money tree hopes to overcome smartphone sales downturn and global recession risk
03/02/2019

Last November, I wrote one of my “most-read posts”, titled Global smartphone recession ...

Read
Global smartphone recession confirms consumer downturn
11/11/2018

Q3 smartphone sales data show the global market in recession, as Strategy Analytics confirmed: “Th...

Read
Trump’s auto trade war adds to US demographic and debt headwinds
06/08/2018

President Trump’s auto trade tariffs are bad news for the US and global auto industry, as the ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more