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Demographics Still Drive the Housing Market

The latest article from Robert Charles Lesser & Co (RCLCO) shows an interesting chart of the demographic changes in the housing market and could be viewed as a predictor of the next phase of housing starts around the country.

Written by Gregg Logan, the Managing Director of the firm, the article is part two of a series that looks at the current housing market as analyzed by demographic.  The categories are the Eisenhowers and Great Generation, the Baby Boomers, Generation X and Gen Y.  This one focuses on the impact of Generation Y as they enter the home buying marketplace.

The economy is having a major impact on how fast this generation of 30 and under moves from the multifamily market into the home buying market.  Logan writes:

“The rate at which Generation Y is forming new households is currently lower than Generation X before them, as young people in their early 20’s today have found themselves in a tougher job market, contending with higher unemployment at a point in time where they would traditionally be seeking their economic independence.  This has temporarily depressed their impact on housing demand, but as the economy continues to recover during the next two years there will be significant “unbundling” that’s likely to create a surge in demand.”

That condition is reflected in the following chart RCLCO created from U.S. Census data which shows the percent of renters by demographic.

These trends will have an impact on the residential construction business as we know it.  As those Gen Y’ers create future demand when the economy recovers and they are able to move to their own homes, we will likely see a major surge in homebuilding.

That assumes that the current housing crisis passes as the economy improves.

Logan does a great job explaining the figures.  The next installment in his series will cover the places where that new demand will want to live.

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