Introduction
The CEO of an advisory firm predicts that U.S. housing prices will enter a long period of decline. This prediction is based on an anticipated shift in the supply-demand dynamic of the housing market.
Supply-Demand Imbalance
Currently, the U.S. housing market has a supply-demand imbalance, characterized by more demand and less supply. This imbalance is expected to invert, leading to more supply and less demand.
Demographic Ownership Patterns
A significant factor in this projected decline is the demographic pattern of homeownership. In the United States, 90% of housing is owned by households over the age of 40. Further breaking down the data, 74% of housing is owned by individuals over 50 years old, and 56% is owned by those over 60. In stark contrast, the smallest percentage of homeownership is among individuals under 30 years old.
Decline in Household Formation
Household growth and formation are currently at their lowest levels in 160 years, leading to a potential demand problem. Several factors contribute to this decline, including men staying single longer and an increase in the average age of first-time homebuyers, which has risen from the low 30s to the high 30s.
Young Men Living at Home
A significant number of young men aged 24-35 are choosing to live at home. In 2013, young men were 50% more likely to live at home compared to women. Currently, young men are twice as likely to live at home as young women, with one out of five young men living at home with their parents. This trend is not just among those attending college and returning home for breaks; it is a choice among many young adults.
Income Inequality and Homeownership
Income inequality and lack of opportunities are impacting young men’s ability to form households and buy homes. Single individuals face more challenges in affording homes compared to dual-income families.
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