Harvard’s Joint Center for Housing Studies (JCHS) recently upgraded its projections for new household growth through the year 2038 at a total of 21.8M. The JCHS split this total into two time blocks…a projected 12.2M new households from 2018-2028, -1.4M lower than projected in 2016, and a projected 9.6M new households from 2028 – 2038.
Harvard’s JCHS regards the rate of foreign immigration as the most important factor influencing the level of household formation in the US. The slower the rate and the lower the volume of foreign migration, the lower the rate and volume of new household formation despite the continued growth of young adults forming new households into the near future Why? There simply are not enough young people forming new households to outweigh the rising numbers of losses due to deaths among the country’s oldest households.
Second to foreign immigration, Harvard’s JCHS sees the second most important factor involved with declining rates of new household formation as being the rate at which existing housing units are replaced. Right now, housing production is not keeping pace with housing demands. The JCHS sees that production becoming even more limited into the future as both supply and labor constraints within both new construction and existing unit renovation worsen over time. If this shortfall in the housing market’s inability to meet housing demands, the result may be raising housing prices.
Lastly, Harvard’s JCHS speculates that changes in economic conditions as those conditions relate to housing affordability could even further reduce the rate of household formation in the coming years.
Based upon its tenure projections between 2018-2038, the JCHS projected that demographic data points such as age, race/ethnicity and family type will almost entirely offset one another. The center expects some 8.9M new homeowner households by 2025 and some 4.7M renter households by 2015.
This projection of 8.9M new homeowner households translates into a homeownership rate between 60.7% – 64.8% by 2025. As of Q3 2018, the homeownership rate was 64.4%.