Photo: Robert Clark
Although a new study by the Harvard Joint Center for Housing Studies (JCHS) downgraded the number of new US households expected to form over the next decade, homebuilders still have a long way to go to adequately meet tomorrow’s demand.
“Even based on these lower projections, this new projection for 2018-2028 demand would still exceed the rate of housing production as of 2018,” reads the study.
According to the new JCHS projections, the number of US households will grow by 12.2 million between 2018 and 2028, and then 9.6 million between 2028 and 2038.
These projections were downgraded from the JCHS’s 2016 estimates, which called for 13.6 million households between 2015 and 2025 and then 11 million for 2025 through 2035.
New construction levels dropped off sharply following the housing collapse 10 years ago, staying well below historic norms. To date, there have been few, if any, signs that the severe national housing shortage is going to end any time soon.
“Household growth must be accommodated either by the addition of a new housing unit, the absorption of an existing vacant unit, the subdivision of an existing home into multiple housing units, or the conversion of a non-residential structure into a home,” reads the report.
National housing stock grew a modest 0.4 percent year-over-year in November 2018, following nearly four years of annual declines, according to the listing site Zillow. Inventory grew slightly on an annual basis for the two months prior to November.
Aaron Terrazas, Zillow senior economist, called November’s modest gains “a step in the right direction” but was quick to add that “there’s a long march to go” before supply even comes close to adequately meeting demand.
Despite the downgrade, JCHS says that the driving factors behind household growth remain mostly unaltered.
Millennial, minority and single-person households are projected to see “significant” growth over the next 10 to 20 years. In fact, the number of Hispanic households is projected to account for 37 percent of total growth between 2018 and 2028.
Over the next decade, the JCHS predicts that household growth will grow by nearly three million for Millennials between 35 and 44 years old. Single-person households (4.6 million) and married-without children (3.8 million) households will also see significant growth.
Meantime, Millennials, who have been largely absent from the housing market, are beginning to age into their “prime homebuying years.” They will be looking to put down roots and start families in a home that they own instead of rent.
Currently, just over one-third of American adults under 35 years old own a home, but Millennial homebuyers contributed the most to overall homeownership growth in the third quarter of 2018.
And while expert predictions for the US housing market have largely called for an overall cooling as price growth slows nationwide, the lack of new inventory looks likely to remain a thorn in the side of the market in 2019.
But the real problem with dwindling supply may be a shortage of skilled laborers.
Over the last four to five years, many building slowdowns have been caused by a worsening labor shortage. Currently, there are over 270,000 unfilled construction jobs nationwide.
“The housing market could grow faster if there were more workers,” Robert Dietz, National Association of Home Builders chief economist, recently told Livabl.