THE PROSPECTS FOR HOUSEHOLD GROWTH
The joint center for housing studies at Harvard University reports
Given that the number of new homes added in 2002–11 was
lower than in any other ten-year period since the early 1970s, it
is difficult to argue that overbuilding is dragging down the housing
market. Instead, the excess housing supply largely reflects
the sharp slowdown in average annual household growth in
2007–11 to just 568,000—less than half the pace in the first half
of the 2000s or even the 1.15 million averaged in the late 1990s
are responsible for this drop: a decline in the rate at
which individuals (particularly those under age 35) form independent
households, and a sharp drop in immigration. While
a variety of forces contributed to these trends, the severity of 
the economic recession clearly played a significant role. As 2012
began, the ingredients needed to spark more normal household
growth were still not in place. In particular, the unemployment
rate remained elevated, and in fact would have been even higher
if so many discouraged workers had not exited the labor market.
But over the longer run, the most important drivers of household
growth are the size and age structure of the adult population.
Assuming the economic recovery is sustained in the next few
years, the growth and aging of the current population alone—
including the entrance of the echo boomers into adulthood—
should support the addition of about 1.0 million new households
per year over the next decade. The biggest unknown is the contribution
of immigration to overall population growth. But even
assuming net inflows are roughly half the level in the Census 
Bureau’s 2008 projection, the Joint Center for Housing Studies
projects household growth should still average 1.18 million a year
in 2010–20.
Another key question about future housing demand relates to
the aging of the baby boomers. The leading edge of this group
reached 65 in 2011, entering the phase of life when they are
less likely to move to different homes. And if they do move,
many are apt to downsize. The baby boomers should therefore
play a smaller part in setting the pace of housing demand in
the coming years. In fact, the baby-boom generation’s dominance
of the new home market had already receded by the
time of the housing boom. In 2010, the baby-bust cohort (aged
25–44 in that year) occupied nearly half of the homes built
since 2000, while the baby boomers lived in only 34 percent of 
these newer units
Over the next 20 years, the echo boomers have the potential to
spur new home demand to an even greater extent than their
parents did beginning 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.
Because the echo boomers are much more racially and ethnically
diverse than previous generations, a larger share of tomorrow’s
young households will be minorities. Indeed, the Joint 
Center projects that minorities will account for more than 70
percent of net household growth in 2010–20. Both the housing
industry and the mortgage market will need to find ways to
adapt to this impending shift in housing demand.
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