Changing demographics are the main cause of today’s housing surplus, according to new research by University of Virginia urban and environmental planning professor William Lucy. He says the path to a housing market rebound doesn’t lie in new construction, but in rethinking housing needs based on changing demographics.
Lucy’s study of U.S. Census Bureau data, U.S. Housing Market Conditions: Historical Data, U.S. Department of Housing and Urban Development reports, Joint Center for Housing Studies and research by the Urban Land Institute and other scholars, resulted in this conclusion publicized in a University of Virginia press release: “Today’s surplus housing is not caused by either excessive new construction or by foreclosure.” In fact, Lucy found only 20 percent of housing units for sale or sold from 2009 to 2010 were new houses and foreclosures.
Lucy says our excess housing supply is not linked with the economic downturn, but caused by the increase in homeowners over age 55 who want to sell and downsize, coupled with the decrease in number of 30- to 45-year-olds who want to buy. He found from 2000 to 2009, the number of homeowners 55 and over who may want to sell increased by 8 million, while the number of potential 30- to 45-year-old homebuyers decreased by 3.6 million. Moreover, the ratio of aging baby boomers to young adults was 5 to 1 in 2010, a dramatic increase from 3.5 to 1 in 2000 and 3 to 1 in 1990.
Because the demographic shift of too many sellers and too few buyers is not likely to change anytime soon, Lucy says economic drivers of the future housing market will be “more decentralized, multidimensional and shared solutions by developers, builders and government and opportunities for fix-up, remodeling, expansion and condominium projects in cities and inner suburbs, fueled by preferences for convenient locations.”
Read the full Report, where Lucy stresses that “location, location, location” is still a real estate mantra, but that homebuyers will continue to favor more urban settings over distant suburbs.