Thursday, August 28, 2014 - Article by: Justin Fitzhugh - Nations Lending Corporation -
Last week I began to discuss the Housing, Americas Future study. My intention is to summarize the various points the Bipartisan Policy Think Tank addresses through this study with the vision to promote involvement of mortgage professionals into the shaping of our industry. In line with this vision, today I follow up with a discussion of the Studys first chapter Our Nations Housing. As you may infer from this title, this chapter talk about the role housing has played in our economy since the 1920s, and introduces demographic statistics that give us a picture of todays housing trends and a forecast of what we can expect in the next five years.
HOUSING IS A CRITICAL DRIVER OF OUR COUNTRYS ECONOMY:
For generations, Americans have looked to housing as a source of economic vitality and economic growth. We have observed that a vibrant housing market translates into into more jobs, higher family incomes, and a prosperous nation. Through residential investment, housing consumption of home related goods and services, the housing sector has, in average, contributed between 17 and 19 percent to our gross domestic product (GDP), but after the Great Recession, contributions levels dropped to 15 percent.
A side effect of diminished investments in residential fixed capital is the continuing increase in rents (and rants... lol). Today, in average, between 30 and 50 percent of a renters household income goes to paying the rent (and to fueling the rants). But many studies point to evidence that shows affordable, stable housing, which is located in areas that provide opportunities and services, gives rise to other benefits that build up the welfare of communities and the country at large.
Our life expectancy increased to an average of 77 years old, and I think this number will continue to increase. But contrary to older patterns, today, seniors are choosing to age in place. The upcoming senior generation will be made of Baby Boomers; the oldest members of this group became seniors in 2011, and at the fore of the explosion of the number of older Americans. Over the next two decades, seniors will account for 20 percent of the population.
The decision of many seniors to age in place has many implications for the economy at large, because the elderly have greater health care and safety needs; looking at this from housing perspective, those who choose to age in place will require to adjust their home to meet these needs, while those who choose to rent will require affordable housing close to areas with health care services.
In midst of booming seniors, the Echo Booming generation finds itself as the most educated generation, with the highest levels of credit card and student debt ever. Given past patterns, we were expecting this generation to begin myriad of household formations, but after the Great Recession, this generation struggled to find jobs.
In the past, the rate of homeownership by minority groups has lagged white households, but census data forecasts that households formed between 2010 and 2020 will be headed my these groups, and by 2020, minority groups will account for one third of Americas household formation.
RECOMMENDATIONS BY THE BIPARTISAN POLICY CENTER BASED ON THESE FACTS:
If our nation can offer a broad range of affordable housing options, we will be stronger and better positioned to compete in the global stage. It is paramount that Housing Federal programs assist those in most need, while at the same time Federal policy strikes a balance between homeownership and rental subsidies. On the Private Investment spectrum, our housing finance system should promote uninterrupted availability of affordable credit to the average American and investment capital.
Although the Echo Boomer generation has faced its own financial challenges, if our economic activity continues to strengthen, we shall see this generation absorb housing from Baby Boomers, and well achieve a vital and stable housing market.
READING THE DEMOGRAPHIC STATISTICS presented by the Study has cemented my belief that we are interdependent. We build our present as we go, but as we prepare for the future, we must account for the foundations in which weve built. It is clear to me that we are required to invest in the development of sustainable communities through sustainable policies and programs. To some, this may sound like a conundrum, but we are more educated than ever, we get to live much longer than ever, and we have technology that can help us analyze the steps we have taken and actions that will take; I think that we can face our challenges and build a tomorrow that feeds from serving the elder and investing in the young.
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