It is expected the face of the real estate market will look quite different in 10 years’ time, as there should be millions of new households which will help boost starter home and rental markets. Half of these new households will be minorities, and it all depends on their access to mortgage lending as to whether they rent or buy.
An article in RISMedia has looked at the 2014 State of the Nation’s Housing Report from Harvard’s Joint Center for Housing Studies. While the report is reasonably upbeat, it does highlight the fact that owning a home in the future may be challenging. Ten years from now it's expected the number of households in their 30s will increase by 2.7 million, and many of these younger households will be minorities. By the time we reach 2025 minorities are expected to account for 36% of all households in the US, and 46% of households aged between 25 and 34.This means they will account for nearly half of first-time buyers.
In the meantime the baby boomers will boost the number of households age 65 and over by 10.7 million. It's expected a large number of these households will make modifications and improvements to their current homes to cope with the process of aging. However others will seek out new types of housing specially geared towards seniors.
At the moment minority households tend to have lower incomes than white households, and their demand for owner occupied housing will largely depend on the availability of mortgages designed to accommodate more limited resources. The report points out that unless the mortgage market can accommodate this new generation of households there is a possibility that fewer people will be able to enjoy owning their own home in the future. This could mean the current mortgage industry would end up with a much smaller pool of potential borrowers unless it adapts.
In spite of this issue over credit, the report is generally positive about the environment for homeownership. Although homeownership rates dropped again in 2013, which means they have fallen for nearly a decade, it anticipated the growing economy will eventually lead to increased household incomes. This is a key driver in housing demand, and even though interest rates and house prices have increased recently the market still favors those looking to buy.
Although access to credit may limit the number of homebuyers in the future, rentals are booming at the moment. Since homeownership reached a peak in 2005, there have been 1 million new renters annually which is double the average rate seen at any time since the 60s.