Demographics and housing in America.

Abstract

Family-building needs of the "nesting" generation and its offspring, the baby boomers born 1947-1964, dominated post-World War 2 housing demand and production to 1970. Centered on tract-house suburbia, annual housing starts averaged 1.5 million a year in the 1950s and 1960s. With growing real median family incomes, the average size of new dwellings increased and 63% of households owned their homes by 1970, compared to 44% in 1940. The baby boomers' arrival at the ages of household formation sparked the "Golden Housing Age" of the 1970s. Net household increase averaged a record 1.7 million a year and 19 million year-round dwellings were added to the national inventory compared to 11 million in the 1950s and 1960s, despite a plunge in housing starts during the 1974-75 recession. Real median family income declined after 1973 and inflation escalated housing costs but at the same time fueled demand for housing as an investment hedge against inflation. The singles and "mingles" life styles of youthful baby boomers boosted rental housing, condominiums, and compact townhouses. Married-couple households dropped from 74% of the total in 1960 to 58% in 1975. Household formation and housing starts dropped drastically with the 1980-82 recession but bounced back as the economy recovered in 1983-85 and restrained inflation braked housing cost rises. Projections show overall household increases reduced to barely a million a year in 1990-95, with renter household gains at just 175,000, compared to 1/2 a million a year in the 1970s, as the household-formation ages of 18-34 are taken over by the baby bust generation. This will be offset by the baby boomers' maturing into middle age. By 1995 most of the giant generation will be in the peak-earning, high-homeownership ages of 35-54. Married-couple households in this age bracket will account for 56% of the household gain from 1983 to 1995, boosting national affluence and the demand for upscale housing, likely to be located in the suburbs.