The surge.

Author:Imura, Paul


The U.S. homeownership rate--a significant factor in our economy as it drives job creation, consumption and personal wealth--fell to almost a 50-year low at 63.4 percent in 2015. That left the United States in 40th position when it comes to homeownership rates of other countries around the world. [paragraph] Many experts in our industry focus on the headwinds that will continue to cause homeownership rates to contract, but in this article we are challenging that outlook. Our country is in the midst of profound demographic changes and the tailwind forces they produce could position us for a real surge in homeownership. [paragraph] A domino effect from increasing population, household growth and housing-need trends will reach a tipping point that will help drive the housing market into its next surge. This will come in spite of the current stretch of declining originations. [paragraph] Significant population changes will occur over the next several years that will move the needle on home-buying decisions and demand, such as: exponential U.S. population growth and steady household growth, a record-size millennial population (currently ages 19-35, according to the Pew Research Center, Washington, D.C.), the graying of America and a changing balance of ethnic and racial diversity.

We are also seeing signs in the mortgage industry of a willingness to take on more risk and close the gap in homeownership.

In this two-part series, we present compelling data and coordinated feedback from various mortgage executives on how different generations, demographics and drivers can shape a scenario where we start to see a surge in homeownership and mortgage lending by 2020.

U.S. population and household growth

In the brief time it takes the average mortgage banker to take a loan application, the U.S. population will increase by 211 people. The United States experiences one birth every 8 seconds, one death every 10 seconds and one immigration every 29 seconds, for a net gain of one person every 17 seconds.

That is almost 2 million new people per year.

Household growth is also expected to increase, matching pre-2008 rates, as both the overall population and millennial households multiply. Even with an additional 30 million new households over the next 15 years and a constant homeownership rate at the current 63.4 percent, the number of new homeowners will increase by 19 million.

At first glance, a chart depicting population growth may resemble pre-2008 U.S. home values skyrocketing to the stars--but look closer to discover the U.S. population's explosion, of which we are already in the midst (see Figure 1).

The millennial population

The millennial generation, born between the early 1980s and mid-1990s, currently accounts for more than 76 million Americans, according to the Pew Research Center. It has displaced baby boomers as this country's largest generation. The already staggering number of millennials will continue to increase...

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