Following the trend of Developed economy the developing economies like Indian, eventually follows similar demand pattern.

1. US HOUSING DEMAND

2. BACKGROUND
 In U.S., the government has sponsored major studies of housing demand and
supply behaviour such as those of the Experimental Housing Allowance
Program which were explicitly designed to facilitate choices among alternative
housing policy instruments.
 There are Three types of Federal Housing Assistance Program as listed below.
Owned, operated and funded by different authorities.
Public housing
Local Public Housing Societies
Funded by Federal Government
Private housing
Non-Profit/For-Profit private firms
Subsidies by government
Tenant –based housing
Assistant to private housing
Housing Allowance and Vouchers

3. Housing Boom
(United States)-
• The Housing
and Economic
conditions were
most favourable in
1980s.
• This lead to
Increase in
Housing demand
from 1980-2000
• Resulted, prices of
homes rising in
2005-08
• Encouraged,
construction 2000-
05
• Also leading to
increased
and inflation in
2010.
*Explained in detail in latter
slides

4. Economic Outlook : United States

5. Policy Formation : United States
1918
• U.S. Housing Corporation
• 15000 housing unit
• for war workers
1937
• Wagner-Steagall Act (Housing Act)
• 160000 units built
• Decent, Safe and Sanitary dwelling for low income group
1949
• Housing Act
• 321045 units built
• Liberalizing homeownership and relocating poor families
1959
• Housing Act
• Allowed housing auhorities to set their income levels and rent
1974
• Hosing and Community Development Act
• Subsidies to low income group to pay difference in Fair Market Rent and 25% of their income

6. Description of Aid provided
 Aid provided to household of low income i.e., does not exceed 80% of local
median income ($40000 in 1980)
 Major program require a minimum rent of $25-$50 per month, even if it
exceeds 30% of their income.
 The Authority may make loans to public-housing agencies to assist the
development, acquisition, or administration of low-rent-housing or slum-
clearance projects by such agencies.
 Where capital grants are made, the total amount of such loans outstanding in no
event shall said loans exceed 90 per centum of such cost.
 Such loans shall bear interest at such rate not less than the going Federal rate
at the time the loan is made, plus one-half of one per centum, shall be repaid
within such period not exceeding sixty years, as may be deemed advisable by
the Authority

7. Economic outlook : Current
 U.S. Economy is Highly developed Mixed Economy
 It is world largest economy by nominal GDP
 Second largest by Purchasing power
 Seventh largest in Per Capita income
 Third Largest in Population
 The Home Ownership rate in Q1 2018 was 64.2% as compared to 69.2% in Q4
2004 during the housing bubble
 Average homes in U.S. is more than 700sq feet per person, which is 50-100%
more than average in other high-income countries.
 First time in 130 years, Americans aged 18 to 34 are likely to live with parents.

8. 0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
0
50
100
150
1975
1980
1985
1990
1995
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
Houses in United States (million)
Houses (million) Growth
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
-
50.00
100.00
150.00
200.00
250.00
300.00
350.00
1955 1965 1975 1985 1995 2005 2015 2017
Population (million)
Population Growth in Population

9. Impact On Housing : GDP Contribution
 Combined Contribution is 15-18%, and occurs in two ways
 Residential Investment (3-5% of GDP)
 Consumption spending on housing service (12-13% of GDP) include owner’s imputed
rent
-5.0%
0.0%
5.0%
10.0%
15.0%
1980 1985 1990 1995 2000 2005 2010 2016 2017
GDP and Housing unit Growth
Growth in GDP Growth in Housing units

10. -
5,000
10,000
15,000
20,000
1980 1985 1990 1995 2000 2005 2010 2016 2017
Housing Contribution to GDP (Billion US$)
Other Components of GDP Residential Fixed Investment
Housing Services
-
1,000
2,000
3,000
4,000
1980 1985 1990 1995 2000 2005 2010 2016 2017
Housing Contribution to Total Investment
(Billion US$)
Gross private domestic investment (Other) Residential Fixed Investment
-
5,000
10,000
15,000
1980 1985 1990 1995 2000 2005 2010 2016 2017
Housing Contribution to Total Expenditure
(Billion US$)
Personal Consumption Expenditures (Other) Housing Services
-
5,000
10,000
15,000
20,000
1980 1985 1990 1995 2000 2005 2010 2016 2017
GDP and its components
Other Components of GDP Gross private domestic investment
Personal Consumption Expenditures

11. Impact on Housing : Population
 Population growth is the biggest driving factor for household demand
 The decline in Population is likely due to lower level of immigration, population
aging, lower births and low natural increase. And accordingly, lower housing
demand since most housing is built for new demand not as replacement.
0%
5%
10%
15%
1980 1985 1990 1995 2000 2005 2010 2015 2016 2017
Housing Vs Population Growth
Growth in Population Growth in Housing Unit

12. Impact on Housing : Population -Migration
 The relation with housing can be defined as : Less the urgent migration, closer related
to housing.
 As observed, Migration has reduced drastically since, 2011 and so the housing growth.
0.00%
20.00%
40.00%
60.00%
80.00%
1980 1990 2000 2010 2011 2012 2013 2014 2015 2016
Immigrants Vs Housing Unit Growth
Growth in Immigrants Growth in Housing
-20%
0%
20%
40%
60%
80%
-
1,000.00
2,000.00
3,000.00
4,000.00
1950 1960 1970 1980 1990 2000 2010 2011 2012 2013 2014 2015 2016
Immigrants Vs Population
Number of Immigrants Popuation other than Immigrants
Growth in Immigrants

13. Impact on Housing : Population –
Household Formation
 Household Demand can be judged on parameters like Family and Non Family inhabitants, age
group where demand is maximum.
 As observed, the family occupying household has reduced with time from 89% in 1950 to 70% in
1995 and finally to 66% in 2017.
 Also age bracket for house ownership is shifting from 35-54 years bracket to 55-74 bracket.
0.00
10.00
20.00
30.00
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2016
2017
Household by Family (in ten thousand)
Total households Family households Nonfamily households
-
5.00
10.00
15.00
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2016 2017
Household by Age(in ten thousand)
Under 25 35 to 44 years 45 to 54 years
55 to 64 years Above 65 65 to 74 years

14. Impact on Housing : Population –
Household Formation (continued)
 Further, on number of people living together and by relation between members
 As observed from the graph, nearly 60% of the population live either alone or in group of two,
while 30% in group of 3-4. Concentrating more in nuclear living with time.
 As per the members, married couples occupy 52% of household, followed by cohabiting couple
25%.Also increase in male and female member living alone totalling to 30%.
0.00
2.00
4.00
6.00
1950 1960 1970 1980 1990 2000 2010 2020
Household by Number of People (In ten Thousand)
One Two Three
Four Five Six
Seven or more
21.00
22.00
23.00
24.00
25.00
0.00
5.00
10.00
15.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Household by Member
Married couple Cohabiting couple
Mother, no partner present1 Father, no partner present1
Female householder living alone Male householder living alone
Other Total

15. Impact on Housing Prices : Purchasing
Power
 Increase in Income will impact
Housing prices.
 Housing is investment different
from stock, bonds or funds
because it can be classified as
consumer goods as well as
monetary investment.
 House Price-to-Income ratio is
the affordability index.
 Prices are elevated by
consumption demand, investment
demand and speculative demand.

16. 0
100
200
300
400
500
1960 1970 1980 1990 2000 2010 2020
Prices (Thousand US$)
• As observed, Housing prices
were highest in 2000-10,
increasing with a positive trend
thereafter.
• While the per capita income
being highest in 2000-10 before
declining in 2010, after the bubble
burst.
-
20.00
40.00
60.00
80.00
0
100
200
300
400
500
1965 1975 1985 1995 2005 2011 2013 2015 2017
Per Capita Income Vs Housing Prices (Thousand
US$)
Per Capita Income (Thousand US$) Prices (Thousand US$)
0
50
100
150
200
250
300
350
400
1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015
Prices (Thousand US$)-A closer look

17. Impact on Housing : Mortgage Interest
Rates
 Interest rates have ranged from 13.63% in 1981 to 3.31% in 2012.
 The housing unit growth was high in 1980-90, 2010 due to reduced interest rates,
as observed from graph below
0.00%
5.00%
10.00%
15.00%
1970 1980 1990 2000 2010 2020
Average Rate
0%
2%
4%
6%
8%
10%
12%
0.00%
5.00%
10.00%
15.00%
1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2015 2016 2017
Interest Rates Vs Housing unit Growth
Average Rate Growth in Housing units

18. Outcome : New House Constructed
 Favourable growth of Income increased housing demand, further encouraging
more new construction.
 This construction boom was seen in 2000-05 simultaneous with housing demand
boom.
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
0.0
200.0
400.0
600.0
800.0
1,000.0
1970 1980 1990 1995 2000 2005 2010 2015 2016 2017
New Housing Unit Constructed
Northeast Midwest South West Total
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
0
0.2
0.4
0.6
0.8
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2016
2017
Income Vs Population Growth
Growth in Per Capita Income Growth in Population

19. Outcome : Housing Mortgage Loan
Increased
 In response to increase in Housing demand in 1980, loan outstanding increased by
84%, then by 79% in 2005.
-50%
0%
50%
100%
0
5
10
15
20
1950 1960 1970 1980 1990 2000 2010 2012 2014 2016
Mortgage Debt Outstanding
(Trillion US$)
Mortgage Loan Outstanding Growth
-
5.00
10.00
15.00
20.00
25.00
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
GDP Vs Mortgage Debt Outstanding (Trillion
US$)
Mortgage Loan Outstanding Remaming GDP

20. Outcome : Inflation
 Increased Housing demand, lead to new construction. Further, increased spending
on Appliances, Furniture and other housing services.
 As observed, expenditure growth was highest in 2010-16, which moved the
inflation in positive trend in 2010-14.
0.00%
5.00%
10.00%
15.00%
1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Inflation
0
500
1000
1500
2000
2500
1980 1985 1990 1995 2000 2005 2010 2016 2017
Housing Services Expenditure

21. Housing Demand Summary
United States
Rising
(1970-80)
Decease
(1985-95)
Consolidation
(2000)
Bubble Burst
(2005-15)
Consolidation
(2017)
Population Growth Constant Constant Equal to growth in
housing unit
Decrease Equal to growth in
housing unit
Per Capita Income 2/3 times growth
in Housing unit
Decrease Increase Decrease Constant
Housing Price Growth Increase Almost constant Increase Increase Increase
Age 30% Below 34 25% Below 34 Maximum 34-65 60% from 34-65 Above 65
Residential Investment/Expense
growth
Growth in
Investment 3 times
expense
Growth in
Investment 3 times
expense and GDP
Growth in Expense
Equal to GDP growth
Growth in Expense
Equal to Investment
Growth in Expense
Equal to GDP growth
Mortgage Interest and debt
outstanding
Highest Decrease Increase Ends at Lowest Slight Increase
GDP Growth Increase Almost constant Highest Decrease Decrease
New House Constructed Growth Slight Increase Decrease Increase Highest Decrease

22. Comparing Indian Housing Demand

23. 0%
20%
40%
60%
80%
100%
0
50,000
100,000
150,000
1975 1980 1985 1990 1995 2000 2005 2010 2015 2017
Per Capita Income
Per Capita Income Growth
0%
2%
4%
6%
8%
10%
12%
14%
0
200
400
600
800
1000
1200
1400
1600
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2016
2017
2018
Population (million)
Population Growth
0%
5%
10%
15%
20%
1990 1995 2000 2005 2010 2015 2020
Mortgage Interest %
0%
50%
100%
150%
-
1.00
2.00
3.00
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2017
GDP (Trillion US$)
GDP(Trillion US$) Growth

24. Housing Demand India
 Rising-1985-95-Population constant, Increase in per capita Income, Interest
highest, GDP growth increase trend
 Decrease-1995-2005-Per capita decrease, Interest decrease, GDP growth increase
trend
 Consolidation-2010-per capita increase, Interest rate increase, GDP growth highest
 Bubble burst-2010-17- population decrease, per capita decrease, prices increase,
interest decreasing, GDP growth decrease trend
 India heading towards consolidation phase with housing demand growth equal to
population growth, Per Capita to remain constant, Housing prices to increase ,
Slight increase in Mortgage interest and finally slight decrease in GDP growth
trend.
0%
50%
0
500
2010 2011 2012 2013 2014 2015 2016 2017
Prices
Price growth