Future demand for housing expected to continue, with low supply levels
Housing is the principal driver of some wood products, and reverberates throughout economy
MADISON, Wis. -- Demographics and a huge deficit of available housing should lead to a strong demand for housing for several years, according to a major study of U.S. housing trends from Harvard University. The study noted that at the current sales rate of homes, the number of months supply of existing homes for sale could dip below two months for the first time in history.
“At the same time, though, demand for homeownership is likely to remain robust as the huge millennial generation continues to move through the prime ages for forming households and buying homes,” the study by the Joint Center for Housing Studies at Harvard predicted. “An expanded supply of for-sale homes would help to slow the meteoric rise in house prices, but new construction also has to pick up substantially to keep homeownership relatively affordable,” the study continued.
Housing is the principal driver of demand for construction lumber and also has a large impact on hardwood sawlogs.
The study also said that the average age of an existing house in the U.S. increased from 34 years to 41 years since 2007. This presages the need for more repair and renovation. It noted data from the Federal Reserve Bank of Philadelphia that projects the need for home renovation and repair in the U.S. at $127 billion. It noted that 45 percent of homes built before 1940 are in need of repair.
Another factor driving a need for renovation is the increasing percentage of homes occupied by seniors who choose to remain in place as they age, requiring modifications for accessibility. Over the next 20 years, the study projects, the number of homes with heads of household over 75 years old will double from 14 million to 28 million. This will increase the need for single-floor homes, wider corridors and hallways and no-step entrances though rehabilitation of existing homes, or new home construction.
In the medium term, housing demand is likely to be more mixed, according to the study.
“Falling birth rates, sharply lower immigration, and higher-than-expected mortality rates have already left population growth at its lowest level in 100 years,” the study said. “Although this slowdown may help to alleviate the current imbalance between housing demand and supply, it also has serious implications for the broader economy.”