The aging of the baby boomer generation and a surge in immigration will shape the future household growth in the U.S., according to new projections from the Joint Center for Housing Studies (JCHS) at Harvard University.
In a presentation, “The Decades Ahead: Projecting Household Growth and New Housing Demand in 2025-2045,” JCHS Senior Research Associate Dan McCue on Friday outlined several key trends that will influence housing formation and supply in the next 20 years.
“The No. 1 takeaway is that household growth is set to slow over the next two decades,” McCue said. “What’s really driving that slowdown is not so much reduced new household formations, but rather, an increase in household dissolutions, particularly among older adult households.”
As the large baby boomer generation ages, their mortality rates will increase, resulting in a surge of household dissolutions to 1.7 million per year by the mid-2030s, up from about 1.2 million annually currently, JCHS research found.
At the same time, immigration is forecasted to be a significant driver of both population and household growth. This growth will mostly be fueled by new household formations headed by people of color, McCue explained.
“In the late 2030s, 2040s, we’ll be in a situation where immigration is responsible for all of the population growth as native-born growth turns negative and the number of births does not keep up with the rising number of deaths in the population,” McCue said.
What’s more: The racial and ethnic diversity of future new household formations shows that from 2035 to 2045, all new household growth will come from Hispanic, Asian and other non-white households, as the share of new white households declines, JCHS projects.
However, the gifting of wealth from existing homeowners to their children is a big issue that “could have the potential of widening the racial gaps in both homeownership and wealth going forward” for people of color who’ve traditionally been sidelined from homeownership, McCue said.
“There’s an increased urgency to reduce these long-standing gaps in homeownership and wealth,” McCue said.
Household growth will spur demand for 14.1 million new homes in coming decade before tapering off
With projected household growth expected to reach 11.2 million between 2025 and 2035 before falling to nearly 7.8 million in the decade after, demand for new housing will slow, too, falling from 14.1 million to 10.7 million, respectively, over the same time periods.
The current undersupply in housing—by as much as 5.5 million existing units, according to 2021 National Association of REALTORS® estimates—isn’t factored into the baseline projections for future housing demand, McCue noted.
However, McCue pointed out the existing housing stock will need to be replaced or renovated to accommodate higher shares of new households, many of which will include multigenerational families and those with children.
JCHS’ research projects there will be more multigenerational households with either an aging parent or adult child living together under one roof. The number of households with a parent age 80 or older living with them will nearly triple by 2045, reaching nearly 8 million. Meanwhile, adult children living at home will jump from 10.9 million in 2025 to 11.9 million by 2045, researchers found.
Another wrinkle to consider is the estimated increase in the share of older Americans who will age in place. Over the next 20 years, households headed by adults aged 80 and older will nearly double from 8.3 million households in 2025 to 15.6 million in 2045.
“At the same time, incomes fall pretty much across the board, so the needs rise, but the ability to accommodate and pay for these growing needs falls,” McCue said. He pointed out that these homes will likely need renovations to make them more accessible to aging homeowners with mobility issues.
As the millennial generation ages into their 40s and 50s over the next 10 to 20 years, researchers expect to see a boost in the number of households with children, with married and unmarried parents. After seeing this rate stay flat for the past decade, McCue said this a notable shift.
“It will mean increased demand for homeownership and size needs for this growth in households with children,” McCue said.
