Housing prices will continue to rise. There will be plenty of mortgage money available. Buyers will want bigger and better homes. Buying is better than renting. People will accept a long commute to live in a nice house.
These long-held beliefs about the housing market have been upended by America's economic doldrums and the bursting of the housing bubble, says Peter Reinhart, director of the Kislak Real Estate Institute at Monmouth University. Reinhart was one of a group of housing experts on a panel at RPA's Regional Assembly last month that looked at the changing housing market.
Driving the change is the evolution of America's demographic profile, as the most significant population cohort of the 20th century — the baby boom generation — moves into retirement. Boomers, born from 1946 to 1964, fueled demand for the prototypical single-family house in the suburbs during their child-rearing years, which came to dominate U.S. housing stock. The boomers are now reaching the period in their lives when they no longer need the large houses in which they raised their children.
Take two key types of households in the New York-New Jersey-Connecticut region: traditional families of a married couple with one or more kids, and single people living alone. From 1970 — 2010, the number of married-with-kids households dropped by almost a half million, from 2.2 million to 1.7 million, an analysis of census data shows. In the same period, the number of households composed of a single person living alone grew by more than one million, from 1.2 million to 2.2 million households in the tri-state region.
But an enormous overhang of family-oriented houses isn't inevitable, said Dowell Myers, a professor of urban planning and demography at University of Southern California. That's because America's immigrants, for whom home ownership is a top priority, could drive a large portion of the market for homes that will come available as baby boomers downsize.
Home-ownership rates among immigrants have soared, Myers notes. Starting with immigrants arriving in the 1970s, homeownership rates rose by about 13% for each decade that they stayed in the country. For immigrants arriving in the 1970s, their homeownership rate was over 70% by 2000, just above the level of native-born Americans.
An "intergenerational partnership" of buyers and sellers — the boomers and the immigrants — would provide boomers with the return on the investment they are anticipating and the immigrants with the upward mobility they seek, he said.
Fatima Shama, commissioner of the Mayor's Office of Immigrant Affairs in New York City, whose office tracks statistics on immigrants in New York City, confirmed that home ownership is a top priority for New York City's one million immigrant households. For many immigrants, home ownership is the sign of "making it" in America.
Even if a large market emerges for the existing homes in the U.S., it is clear there is a mismatch between the current housing stock and the growing demand for more apartments and condominiums, in mixed-use, walkable environments with amenities that appeal to millennials (born 1980 — 2000) and downsizing boomers alike.
But even in the densely developed New York metropolitan region, rental and multifamily housing is a tough sell with local zoning boards that tend to shun multifamily housing for fear it will bring school children with higher tax burdens. Bringing the New York region's housing supply up to speed with the region's housing demand faces the same fundamental paradox of regional planning: local control of land use regulations, requiring painstaking zoning reform on a municipality-by-municipality basis.
Kislak Institute's Reinhart, who spent the first 30 years of his career with Hovnanian Enterprises, New Jersey's largest housing developer, noted that developers will build whatever the market wants. The key questions are, will potential homeowners have the money to buy, and will zoning codes permit developers to build what people want?