More than a million new households a year forecast Echo boomers and a moderate level of immigration will add 1.18 million new households a year through 2020, building demand for both rental and ownership housing, according to the Harvard Joint Center for Housing Studies.
Household growth over the next 20 years could potentially spur new home demand to an even greater extent than the Baby Boomers in the 1970s.
“The good news for housing production is that this new generation already outnumbers that of the baby boomers at the same ages. With even a modest lift from immigration, the echo-boom generation will grow even larger as its members move into the prime household formation years,” reported the Joint Center’s annual State of the Nation’s Housing report.
Declining households were a significant contributor to the fall off in first-time buyers at the end of the last decade. Just 600,000 to 800,000 net new households were formed each year between 2007 and 2011, the lowest levels since the 1940s. If annual growth had instead remained in the 1.2-1.3 million range averaged over the four previous years, there would have been at least 1.8 million-and possibly up to 2.8 million-additional US households in 2011.
However, even the pending decline in the Baby Boomer population won’t be enough to offset the combination of echo boomers and immigrants. Over the longer term, trends in population growth and immigration should balance out any short-run fluctuations in household headship rates, the report said. At 84.7 million strong in 2010, the echo-boom generation is already larger than the baby-boom generation at similar ages and is likely to grow even larger as new immigrants arrive. The oldest of the echo boomers, who turned 25 in 2010, are only now beginning to form their own households. This large cohort will be the primary driver of new household formations over the next two decades.
Meanwhile, the baby boomers will continue to push up the number of senior households for years to come as they replace the much smaller pre-boom generation in the older age groups. While the boomers will eventually release a large number of housing units onto the market, this process will not be a significant issue for another 20 years.
Even with the new household growth, homeownership will to continue to decline in the short term, largely due to the backlog of foreclosures. The number of loans in the foreclosure process remains high despite an 8.5 percent decline from the 2.1 million peak in 2010. More promisingly, though, the number of loans 90 or more days past due fell almost steadily from 2.3 million at the end of 2009 to 1.3 million in the first quarter of 2012.