Earlier this year, the Mortgage Banker’s Association (MBA) released its Housing Demand report ─ a research report looking at the demographic and economic trends over the next decade and how those trends will impact the housing market. Spoiler alert: Despite what the past 5 years or what the media may have you believe, there will be a demand for housing ─ an enormous one, in fact! Read the whole report here.
1. Unprecedented expansion
The MBA’s Housing Demand report expects one of the largest, if not THE largest expansion in the history of the US housing market. That’s not mere hyperbole; there are numbers to back that up. Powered by growth of the oft-talked about Millennials, and even more so by the aging Baby Boom population, the forecast calls for 12.7 million additional owner households by 2024.
That’s an average of nearly 1.3 million new households per year — certainly a positive sign for our industry!
2. No significant jump in homeownership needed to obtain growth
The MBA Housing Demand report looked at two scenarios. The “status quo scenario,” basically made the assumption that homeownership rates would remain at today’s historically low levels. With a population increase of 24 million, under this scenario, the US would expect to see 10.3 million additional owner households over the next 10 years.
Under scenario two, the MBA examined what would happen if homeownership rates among various demographics (age groups, race/ethnicity) were to simply return to their long-term historical averages. It’s under this realistic scenario that we see real growth for the housing industry with an additional 12.7 million owner households created over the next 10 years.
3. “35 is the new 25”
Several in the industry have pointed out that even if we took the housing market crash out of the equation, we should have expected the Millennial homeownership rate to decline. This decline would have been due largely to factors such as more of this generation going to college and many putting off marriage and parenthood until later in life.
The MBA Housing Demand report builds on this idea, detailing that postponing such lifetime milestones isn’t to say that the generation is abandoning them altogether. While Millennials may be establishing families later, it is expected they will look to fulfill the American Dream of homeownership — just like the generations before them.
Are we ready?
The MBA Housing Demand report lays out in impressive detail the why behind the MBA’s forecast; however, to me, the biggest takeaway for all of us in the mortgage industry is, are we ready for this wave of homeowners?
The report discusses the historic example of the Baby Boomer generation, citing how in the early ’70s — prime renting time for this generation — the US saw its largest multi-family construction boom. By the late ’70s, that construction boom was focused more on single-family housing.
Fast-forward to today and we see the verge of the wave of Millennials about to flood into housing, and it is fair to wonder whether we, as an industry, are prepared. Demand for housing will take more than just constructing new homes, though that certainly will be needed. It will impact all areas of financing for these new homeowners. It will require recruiting and training professionals to answer the demand. And it will require innovative products that improve process efficiencies and match sound lending to the needs of a changing demographic.
At MGIC, I have the privilege of heading up MGIC’s Business Strategy and Operations team. This diverse team includes our business operations group who are continuously evolving to keep pace with industry and customer demand. It also includes our Customer Solution team who are focused on helping lenders discover more ways to foster and nurture homeownership in their communities. I know first-hand that lenders across the country are gearing up for the opportunities and challenges ahead. It is good to know, not only that there is such demand for housing over the next decade, but that we as an industry are preparing in earnest to meet that demand.Tags: housing, Housing Market, MBA, Mortgage Industry