PARAMOUNT MORTGAGE - LENDER'S BLOG

After studying the state of the housing market nationwide, the Joint Center for Housing Studies (JCHS) at Harvard University produced a comprehensive report that found the sale of small homes stand to benefit as future homeowners turn toward more affordable, efficient housing.

The JCHS 2011 report predicts more younger and older homeowners are expected to enter the homebuying market in the coming decade, but they will be looking to purchase smaller residences and rental properties. The trend of purchasing larger dream homes is vanishing according to the JCHS report.

“Echo Boomers,” (born 1986 and later), the largest generation ever to reach their 20s, are “entering their peak household formation years,” the report stated. These first-time buyers have the “potential to drive growth” and are the “key to a strong recovery” of the housing market.

“Baby Boomers,” (born 1946 to 1965) are “projected to drive up the number of households over age 65 by some 8.7 million by 2020, a 35 percent increase from 2010.”

The majority of baby boomers are likely to age in place, but the JCHS report predicts, based upon the current mobility rate of homeowners aged 65 to 74, 3.8 million boomers will downsize their homes over the coming decade lifting demand for smaller housing units.

These baby boomers will have a “major impact on the housing markets of preferred retirement destinations” primarily in the South and West.

An estimated 19 million middle-income households between $45,000 and $60,000 now spend half of their income on monthly rent or a mortgage.

“While the sharp declines in both home prices and interest rates have left homes in many places more affordable,” says Eric Belsky, managing director of the JCHS, “unemployment and tightened lending standards have limited the ability of many first-time buyers to capitalize on the situation.”

Even so, there is reason to believe that the echo-boomer generation will be large enough to boost the number of young adult households under age 35 to 26.5 million in the next decade.

Looking ahead to the next ten years, “minorities will account for seven out of ten of the net 11.8 million new households. Hispanics alone will contribute nearly 40 percent of the increase."

“By 2020, minorities are expected to comprise one third of all U.S. households. But with their lower average incomes and wealth than whites, more of these households will have to stretch to afford housing,” the JCHS report stated.