Myers MFE2009

Demand and Demographics with Dowell Myers

The Big Questions
Did demographics cause the boom ...and also the bust?
Perils of aging—who will save us?
Gaining the Long View on turning points: what’s “normal” and what can we expect next?

Market Boom and Bust

The Big Drivers
More Buyers
More people
More income
More investment incentive
Shortage of Supply
Delays in production
Land constraints
Ease of Financing

Minority Dictatorship of New Construction Everyone else lives in existing housing 1% of households (growing segments) dictate type of new construction

Shiller’s 120 Year View of House Prices

Closer View of Prices in 1970 to 2020

Case-Shiller Prices by Metro Area

How Flexible is Demand?

Demand = Consumption Rates X Number of People of Each Type

Household Formation by Age & Decade

Home Ownership by Age & Decade

Paradox of Ownership Trends and Price Age 25-34 1980s 1990s

The Two Drivers: Aging and Immigration

Demographic Growth Native-Born Turning Age 25 Plus Immigrant Arrivals Myers and Pitkin ‘09

…… ?

56 million still kicking in 2030 Dowell Myers 2009

Population Growth in the US (Age 25+) by Major Segment Each Decade Source: Statistical Abstract 2003, Tables No. 12 and HS-3. Myers ‘09

Age Group Increase as Percent of US Population at End of Each Decade The Baby Boomers Surge Forward

Percent of U.S. Population Newly Immigrated in Preceding 10 Years Homer Hoyt 1940 Predicted urban decline

California U.S.
1980s -- 11%
1990s 74% 21%
2000s 73% 28%
2010s 90% ?? 30%
Foreign-Born Share of the Growth in Homeowners Dowell Myers 2009

Soaring Immigrant Homeownership For Each Immigrant Wave Arriving Before 1970, 80, 90, 2000 United States Data Source: Dowell Myers & Cathy Liu, Urban Policy and Research , September 2005 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 70 80 90 00 All Native- born All Foreign- born 1960s Arrivals 1970s Arrivals 1980s Arrivals 1990s Arrivals

Change in Homeownership For Successive Waves of Immigrants Arriving Before 1970, 1980, 1990, or 2000 NY 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 70 80 90 00 TX 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 70 80 90 00 Data Source: Dowell Myers & Cathy Liu, Urban Policy and Research , September 2005 IL 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 70 80 90 00 CA 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 70 80 90 00 FL 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 70 80 90 00 0.8

Turning Points in Cities and Housing

Episodes in the Urban Condition
1. Urban Decline & Abandonment (1950-80)
2. Gentrification, the Long Boom & the Affordability Crisis (1970-2008)
3. Collapse of Apartment Construction (1990-2005)
Urban Revival & the Apartment Rebound (2006~2020)
4. Baby Boomer Sell-Off & Ripple Effects …. (2015-2040)
Source: Dowell Myers and John Pitkin (2009) Annals, AAPSS

Apartment Trend and Outlook

Century of Multifamily Construction Shares

place holder Price series Share of Housing Construction in Apartments

Age Profile of Tenants in Recently Built Apartments

Baby Bust Hits Young Adult Age Growth at Ages 25-34 as a Percent of US Population

Myers and Gearin 2001 based on NAHB data Expressed Preference for a Townhouse in the City

The Baby Boomer Sell-Off

Source: Myers (2007) Immigrants and Boomers , Figure 11.1 Buyers and Sellers per 100 Population Age Per 100 People of Each Age in California Buy Sell Average Annual Rates of Buying and Selling

Seniors (65+) Per 100 Working Age +67% after 2010 Growing Weight of Seniors Compared to Working Age

Annual Net Selling Rate at Age 65-69 Source: Dowell Myers and SungHo Ryu, “Aging Baby Boomers and the Generational Housing Bubble,” Journal of the American Planning Association (winter 2008) Myers and Ryu ‘08

Will Supply Cut Back? Annual Home Sales in Millions

Myers and Pitkin ‘08 Annual Growth in Homeowners by Age Group

Myers’s Projection for California in 2020 Who’s Going to Buy Your House? Source: Immigrants and Boomers , Figure 11.3 Number of Buyers Less Sellers
Hispanic
Asian and Pacific Islander
Black
Non-Hispanic White
Net buyers Net sellers

Need for Bulking Up the Younger Generation 67% Heavier Senior Ratio of Home Sellers

Solution: Bulk them up with education… Everyone a College Grad … and a Home Buyer

… 64% higher
Compared to High School Grads, Latino College Grads Pay Higher House Prices…

The Intergenerational Social Contract Investing in Future Workers & Home Buyers Children Educational Investments Seniors Rewarded Pensions Health Care Home Sales $$ $$ $$ Dowell Myers University of Southern California Replacement Supporters New Workers New Home Buyers New Taxpayers Mature Adults Make Maximum Financial Contributions $$ the cycle of roles

Conclusions for the Future

What Conclusions for the Future?
Homebuying will slump without investment incentive, but a quick, deep decline gets back to normal faster.
Density rules: Apartments have both demographics and postponed buyers feeding their demand. Plus Baby Boomer retirees love those townhomes.
But Baby Boomers will bring us too many old folks. We need to prepare all of the young to help carry the load. Start cultivating future home buyers now.
And immigrants can help fill the gap.

Thank You Dowell Myers <dowell@usc.edu> For more information search for “popdynamics”

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Myers MFE2009

by bthompson on Oct 13, 2009

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