Shifting Foundations: A Deep Dive into Demographics and Housing

Podcast
I hesitate to write “demographics is destiny” here because that has been done to death. Just because something is a cliché, though, doesn’t mean it’s not true. Demographics impact housing in a few massive foundational ways and a thousand small ways. Price, product, place—demographics help define them. On this episode of the New Home Insights Podcast, my guests are Chris Porter and Eric Finnigan, two leaders at John Burns Research and Consulting who live and breathe demographics and what they mean for housing.

Featured guest

Chris Porter, SVP and Chief Demographer, JBREC

Chris brings clarity to JBREC’s clients on demographic trends and translates their impact on local housing markets. He also analyzes and compares local housing market metrics in JBREC’s Metro Analysis and Forecast and Regional Analysis and Forecast monthly reports.

Eric Finnigan, VP of Demographics Research, JBREC

Eric co-leads demographics research at JBREC, helping clients understand how trends in population, households, and migration impact housing demand. He also oversees the US Remodeler Index, a quarterly survey covering the residential remodeling industry.

Transcript

Dean Wehrli:

Hi, everyone, and welcome to the New Home Insights podcast. I’m your host, Dean Wehrli. A huge part of the research in John Burns Research and Consulting is demographics. We recently released our US Demographics Insights and Strategies report. There’s way too much to unpack in one podcast, but we’re going to try. That’s where Eric Finnigan and Chris Porter come in. Eric is our Vice President of Building Products Research & Demographics, and Chris is the Senior Vice President of Research and Chief Demographer here at JBRC. Both spend days and, I’m sure, nights figuring out not just the composition of our world, but how demographics impacts housing in ways obvious and maybe not so much. So that’s what we’re going to do here. We’re going to try to focus on not just the trends, the forecast, the analytics, but also specifically how housing is impacted by all these trends and these projections. Eric, Chris, how you guys doing?

Eric Finnigan:

Great, Dean. Glad to be here.

Chris Porter:

Yeah, thanks, Dean. Appreciate the opportunity.

Dean Wehrli:

I’m glad you’re here. Eric, let’s start with you and let’s just lay some groundwork here. What exactly does it mean when we say that we study demographics, and you and Chris study demographics and housing, and how do we do that maybe a little bit differently than some other folks?

Eric Finnigan:

Sure. We think demographics underlies all housing demand, really almost every industry, but more so in housing. A household’s number one purchase in their lifetime or if they, or someone rents, their biggest monthly expense. So we really think that if you understand what’s happening with demographics, what’s happening with people, their choices around housing, the number of people, their incomes, etc., you can understand a lot about housing. The thing with demographics, it’s a little bit like looking into a crystal ball. There’s a lot about demographics that’s predictable. If you have a view on housing that’s informed by demographics, you can have a really high conviction call in the longer-term future rather than, “Hey, what’s happening today? What’s happening over the next three months?” You can actually look out three, four years, five years, 10 years with a pretty good lens.

Dean Wehrli:

That 10 years though is kind of important, isn’t it? We use a little bit different than a lot of other firms do in looking at these 10 year cohorts. Chris, I love the names by the way, of the 1950s, 1960s. Give us a few of those names of these 10-year cohorts that you study.

Chris Porter:

When John Burns and I wrote the book back in 2016, we wanted to redefine the generations because we just felt they were too broad, too confusing, and if we really wanted to understand who is responsible for shifting certain trends or accelerating or decelerating certain trends in our country, let’s take a little finer point. So we looked at the 10-year cohorts based on the decade you’re born in. We gave each group a nickname based on a trend that they led society in or shifted society toward. So the group born in the 1950s, we call the Innovators. We’ve got the 1960s group called the Equalers. The 1970s group we called the Balancers. For the balancers’ example, that was a group that just said they want more balance in their life than maybe their parents’ generations had.

So it’s a way to redefine the generations and really allow you that more granular view, which I think is really important. Because as Eric mentioned, we can look at people’s patterns of where they live over time and how they live over time, and that shifts, that changes as generations go through those stages of life. So by studying the past, it allows us to think more about how these generations live differently today and how they’re going to live differently tomorrow.

Dean Wehrli:

Let’s start big picture. Eric, let’s start in terms of just sheer volume. What kind of housing demand forecast are we talking about from your analytics?

Eric Finnigan:

We look at this in a couple of different ways. So we look at the population growth of the adults in the US by age group and how many households are in each age group. What’s the headship rate? So what’s the propensity of a person in a single age to identify as a head of household? If you look at those trends over time, you can have a really good look about how many households there are going to be in the future. So we’ve done this over 10 years. We think over the next 10 years, about 1.4 million new households every year for the next 10 years.

Dean Wehrli:

You used a word there that I want to make sure we understand, headship. Explain that because I know it can be a little bit confusing.

Eric Finnigan:

Feel free to stop me anytime if I’m speaking like an economist or using too much jargon. I think about this stuff all the time, so it’s hard to come back to the surface sometimes. Headship is the percent, if you think of just all adults in the US over 18, how many of those adults identify as a head of household? So if there’s a 100 million US adults, it’s way more, but just for numbers, a 100 million adults, if there are 30 million households, the headship rate is 30%. Also, a convenient way of looking at is the inverse of the number of adults per household. So if there’s two adults per household, the headship rate is 50%.

Dean Wehrli:

Got it, okay.

Eric Finnigan:

That goes up and down over time.

Chris Porter:

That point you’re making, Eric, about the 1.4 million, that’s the long-term average. You’re going to have years where it’s going to be less than that. You’re going to have years where it’s more than that. But over the long term, we think that net number works out to be about 1.4 million.

Dean Wehrli:

Well, aren’t you estimating something like about a 1.86 million in terms of housing demand? Do I have that right?

Eric Finnigan:

Yeah. So there’s the household’s component, which is owners and renters that are occupying their homes. There’s also a significant component of second homes, adults that own more than one home. We think that’s about 500,000 over the next 10 years. A bigger number than that though is just the number of homes that are every year functionally obsolete, that they become no longer livable for whatever reason. We think that number is about 2.3 million, about a quarter million per year. Then the final component of demand over that period is the current under-supply of homes. We think the housing market is under-supplied by a little over 2 million right now, 2.1 million. There’s some groups that think it’s three, four, five times that. We think it’s right around 2 million. Our assumption, when we say 1.86 million, is that we get back to normal, get back to a balanced market by 2033, which is it’s a big assumption. There’s a lot of things that have to go right for those 1.8, 1.9 million new homes to be basically delivered and occupied every year.

Dean Wehrli:

That’s not to say that the market is going to be able to deliver that number of homes on an annual basis, right?

Eric Finnigan:

Exactly. That’s where, to me, the conversation gets really interesting. We think the demographic demand for housing is 1.86, call it 1.9 for conversation’s sake, and then if you match that up against how many homes can actually be delivered every year given constraints on building material supply chain, given current labor shortages, given current land shortages, shortages of lots and land, we haven’t built that many homes every year for at least the last 15 to almost 20 years now. So what that means to me looks like a persistently under-supplied housing market.

Dean Wehrli:

And some places it’s worse than others. I’m here in California where it’s a massively persistently under-supplied housing market. Chris, we said we’re going to tease and we’re going to focus on a lot of the impacts on housing. Let’s do that right now. Can you break that demand, if that’s the right word, down into rental versus owner, get a sense of that?

Chris Porter:

If you look at the existing housing stock in the US today that’s occupied, it’s occupied two-thirds owners, about one-third renters. That’s in line with the home ownership rate. The home ownership rate is around 66% today. As we look out over the next decade or so and look at the growth of young adults who are maybe renting today and will eventually move into homeownership. If you look at older adults today who are 80%, 85% homeowners and will be passing away in bigger numbers. You also look at the next wave of households that will form by teenagers and young adults today who are going to be forming households over the next decade, probably going to rent first. We think it actually plays out very similarly. It’s going to be about two-thirds/one-third owners and renters. So there’s growth in both areas over the next decade.

Dean Wehrli:

The ownership rate has been creeping up, but isn’t it still a little bit below the longer-term norm right now?

Chris Porter:

It’s actually pretty consistent with long-term average. I think it’s lower than where we were at the peak of the market back in the mid-2000s. But maybe that’s not a bad thing.

Dean Wehrli:

Yeah, you’re right. We have to remember to look at the long long-term rates to get a sense. But sometimes if you hold it too long term, you miss structural changes, don’t you? You risk doing that. Are there some demographic reasons that is sort of holding back homeownership rate, maybe the age of the population and the station and the life stage of the population?

Chris Porter:

Well, affordability is the biggest challenge out there today, especially for those young households. Maybe they can form a household. There are some young adults who can’t even form their own household because of affordability challenges. It’s not just buying a home. It’s literally even renting an apartment is challenging. One of the things we’ve done is surveyed Gen Z, and this is part of our New Home Trends Institute, and asked them about, “Are you getting any sort of financial assistance from your family to help with living expenses?” The number is 40%. It was, I think, 40% or 42%, and that was for both owners and renters. So forming a household is a challenge in and of itself due to affordability. I think that’s one of the biggest constraints today, especially for those young adult households.

Dean Wehrli:

I may have been mixing that up then. I think I was thinking more in terms of moving. Aren’t we seeing some lower and slower moving churn rate, if you will, these days?

Chris Porter:

Well, that’s true as well. A big part of that is how many people locked in at sub-3% or sub-4% mortgage rates. The overwhelming majority of households in the US are locked in at very low rates. When you consider that a rate today is close to 7%, who needs to trade up to a more expensive monthly payment? Now, you do have older households, a great share of whom have paid off their mortgage. They own their house outright, but they tend to age in place, and so they’re not necessarily moving either, and they’ve got some of the lowest mobility rates amongst all the age groups. So, yes, we’re in this period of time where we just have very low mobility.

It’s interesting. We had some pop up here in the last couple of years as a result of people given more freedom to work from anywhere and could relocate. But when rates are as high as they are… Again, still when you look at history, we’re not talking about 18% rates like the early 1980s. The 7% rate is pretty good in compared to history, but it’s a big change from where we were just a few years ago.

Dean Wehrli:

But do you think that even if the rates had stayed the same, wouldn’t the effects of COVID be ebbing already and movement would equalize? Once people made that move out to they could work from home, they’ve done it. So wouldn’t we have seen that movement rate slow from COVID despite mortgage rates?

Chris Porter:

We are, and we see a little bit of a moderation of rates, people moving in and people moving out, compared to where we were the last couple of years, for sure.

Dean Wehrli:

Peloton should have asked us before they made some very poor decisions. Just kidding, Peloton. Actually, no, I’m not, Peloton. What cohorts right now…? Eric, want to take this one? What are those cohorts that are growing right now? Is it that barbell scenario that folks have been talking about for a while in terms of where the growth is?

Eric Finnigan:

We see two major groups driving growth right now, so the older population, people 70-plus growing by around 12 to 13 million over the next 10 years, just massive growth. Especially if you look at some of the 85-plus generation, it’s just going to be much, much higher than it’s really ever been, much bigger share of the population than it’s ever been. Also, you look at… This is good for housing demand people from 25 up through mid-50s, they also need growth there as well. That’s just from the higher birth rates from the early ’80s up through the 2000s. That’s when people start to form their households. That’s when people move into rental homes for the first time, when they buy their first home, move into trade-up homes. So there’s really those two sort of barbell groups. In between there, there was a fall off in birth rates that people generally call the Gen X generation. So a little bit of a smaller group between 55 and 70 over the next 10 years, but not too much smaller. Gen X isn’t that much smaller than the Baby Boom.

Dean Wehrli:

That 85-plus actually strikes me, in terms of bringing it back to housing, the generation before that is 55-plus communities or 65-plus communities, but the 85-plus, that’s going to impact assisted living and care and those kinds of facilities and demand there, won’t it?

Eric Finnigan:

Yeah. I think I’ve been saying that Baby Boom population, they’ve disrupted housing at every life stage, and they’re going to continue through until they leave.

Chris Porter:

But interestingly enough, the 85-plus, people are living much more independently at 85 than they were five decades ago. A lot of that is enabled by technology. They can have Uber drive them around if they lose their license or have their groceries delivered to them. More and more, we’re also seeing multi-generational housing where you’ve got households taking in elderly parents as well. So I think it affects all different types of housing as well.

Dean Wehrli:

85 is the new 65, is that what you’re saying, Chris? Are you on record?

Chris Porter:

Not exactly.

Dean Wehrli:

Okay.

Chris Porter:

The other thing I would mention as well is that 25 to 54 age group, that is the biggest beneficiary of this increase we’ve seen in immigration and what we expect to see higher levels over the next decade than we’ve seen recently in the last decade. Most people tend to move to the US when they’re in their 20s and their 30s. So that is providing a boost to that young adult population and working-age population over this next decade as well.

Dean Wehrli:

We’ll touch on immigration in just a minute a little more. First, Chris, I want to talk place for a minute. Where are the places, what metro areas, what regions of the country? For the folks playing at home, you probably know the answer to this, but let’s cover it briefly anyway.

Chris Porter:

In terms of people just moving around the country, no big surprise here. It continues to be Florida, Texas, the Southeast. Those are the areas that, relative to their population today, they continue to grow the fastest as people move there. Whether it’s for lifestyle, whether it’s for affordability, whether it’s for retirement, we’re seeing more and more shifting to the South. That’s something that’s been going on for decades. I think it accelerated a little bit here in the last several years. Where are they leaving? We’ve got more people leaving the Midwest, more people leaving the Northeast, leaving California where I’m based. So we are seeing a continuation of these trends that we’ve been seeing for a while, and it got accelerated during the pandemic. I think we’ve slowed down a little bit, but still really strong growth in that southern region of the country.

Dean Wehrli:

I do want to have a little bit of a bone to pick or maybe you agree. A lot of the growth is tracked at the metro level, the metro area level, the MSA, right? In some of these places that are identified that do have significant out-migration, I’m thinking places like the Bay Area and California or even Salt Lake City in Utah, you’re seeing actually some out-migration, some net out-migration there. Those folks leaving though, they’re going a county over or an MSA over, which would still impact the housing for those core MSAs. Does that make sense?

Chris Porter:

It makes a lot of sense, and we’re actually seeing it. You’re right. Salt Lake City is a great example of that. We’ve seen people leaving for Provo. We even see them leaving for Ogden. Some of it is more affordability in those regions. There’s more land availability. In places where maybe city centers have been built out or the metro has been more built out, you’ve now got more land opportunities in some of these neighboring counties or neighboring MSAs. So we’ve seen examples of this all over the country. I can point to some metros outside of Florida or outside of Orlando that have benefited. Some of it is just the locals get priced out of the market, and they move over one county or one metro area. A big reason for that is affordability.

Dean Wehrli:

That can happen anywhere, too. I know Boise, for instance, that was seen… These Californians and Washingtonians who were moving in there we’re pricing the folks who’ve been there a long time out, and they were shifting to further afield from that greater Boise footprint.

I do want to talk about immigration. I know this is a super hot button issue, and we here at John Burns Research and Consulting stay very carefully apolitical about it. We follow the data. If you want answers that fit your preconceptions, there are plenty of places you can go to find them. You’re not going to find that here. We are going to give you answers that help you, that make you smarter, honestly. With that approach, Eric, let’s talk about how critical immigration has been on all of these demographic trends that we’ve talked about so far.

Eric Finnigan:

Coming out of just during COVID, immigration basically ground to a halt. All the borders were shut down. All the visa processing offices around the country, they closed down. So the flow of people moving in ground to a halt. Once the reopening started and these offices started reopening, processing applications, borders reopened, we saw a real snap back and a real fast rebound. We were just looking at legal immigration. So these are worker visas or temporary visas, and we saw this really strong uptick even above where it was before the pandemic. We were like, “Is this a new normal? Is this a phase shift? Is this a temporary thing that’ll revert back to a longer-term level?”

One thing we weren’t at the time looking closely at was what was happening at the border on the southwest border. We’ve gotten smarter on that over time. About six months ago, we were seeing evidence of more people coming into the country through that southern border. There’s more stats available from the Customs and Border Protection Agency. We were really, really surprised with just the volume of the inflow, and not just that the amount of people that are coming in, but the amount of people that are staying.

So what we found out is interesting. When someone crosses the border, most of what’s happening is they’re actually just waiting to be encountered by the Customs and Border Protection Agency. They’re not necessarily sneaking through undetected. Most of the time they are staying there, and they’re actually getting processed into the system. What happens next is that they go through security checks, if they have a criminal background, if they were deported in the past, etc. They expel or deport a lot of people, about 900,000 last year. But about double that receive what they call a notice to appear in front of an immigration court judge. Now, what happened after COVID is that all of the systems got backlogged. When this higher volume of people were coming through the border, that backlog just grew and grew. So now you have this supply of immigration courts with a massive demand. So you’re getting court dates out two years, sometimes three years in the future, and effectively at that point, they can stay in the country until their court date.

Dean Wehrli:

And work? Are they allowed to legally work?

Eric Finnigan:

Well, so the caveat there is they are… Up until about a month ago, or not even a month ago, a couple of weeks ago, so there’s a real shift that’s happened in the last couple of weeks. But before then, if you were in the country for 150 days, you had to be in the country for 150 days, then you could get something called an employment authorization document that lets you work legally. It gives you a social security card. It lets you pay taxes on your income. It lets you rent homes, etc. So they’re effectively citizens or not citizens. They’re effectively residents of the country at that point. What’s happened that’s exciting is in the last two weeks is they’ve shortened down that time frame. It went from 150 days, now it’s down to 30. So starting as of a couple of weeks ago, within 30 days, someone can enter the country, claim asylum, and be part of the typical traditional labor force.

Dean Wehrli:

What that means in terms of growth and household growth is that hasn’t immigration become a huge part of population and household growth and labor force growth here in the US?

Eric Finnigan:

So the big headline is that the US likely just went through the biggest single-year population increase in its history, so 3.8 million more people in the country in 2023 than the year before. So-

Dean Wehrli:

Do we have a total mark of how much of that is immigration versus natural growth?

Eric Finnigan:

Most of that is immigration. So about a half a million of that is just from the natural increase in population, births and excess of deaths. 3.3, we’re saying, is from immigration.

Dean Wehrli:

That’s a huge proportion. When I read that in this publication we referenced earlier, I was very surprised to hear a) that it was that big of a volume. Because that’s a much bigger estimate than the census officially estimates, isn’t it?

Eric Finnigan:

That’s, yes, much bigger. It’s about three times as big.

Dean Wehrli:

And the way that we think we might be… other sources may be counting those folks coming over the border a little better than they had been counted before. Is that fair?

Eric Finnigan:

That’s right, yeah. So the census has their methodologies for tracking this stuff. The Congressional Budget Office, which is a nonpartisan group in Congress that studies all this stuff very closely, they came out with this new estimate that we think is more closely aligned with actually what’s going on.

Chris Porter:

I think when you look at a bunch of other data points, they all point to higher levels of immigration than maybe is being estimated. It’s not just the CBO estimate. It’s other data points as well.

Dean Wehrli:

So the census is almost certainly underestimating the true volume of immigration.

Chris Porter:

We think so.

Dean Wehrli:

What’s the biggest takeaway that you think in terms of this immigration impacts that we’re talking about here, these immigration volumes that we’re talking about on housing? What just comes to the top of your head when you think housing?

Eric Finnigan:

I think it’s the supply and demand. So supply, eventually these workers are going to flow into the labor force, and builders, I think, have a real opportunity to recruit from this population, train them up in the trades as well. On the demand side, it’s happening at the rental housing level, mobile homes, and it’s really all across the country.

Dean Wehrli:

Is it helping builders actually have the labor force to build homes, too? Have you seen any easing in that that you’re aware of?

Eric Finnigan:

We’ve actually asked that in our mid-month builder survey. Our survey team, I think, has a unique view on this. They’re actually not seeing much of an impact yet. The problem is that the shortage of labor is on the skilled trade, so people that are highly trained, and this immigrant workforce that’s coming in is not as trained.

Dean Wehrli:

That makes sense. Let’s shift over to some more specific impacts on housing, maybe a little potpourri of housing impacts. Then we’ll end this show with talking about remote work and hybrid schedules. Chris, let’s start with you. A lot of this forward-looking demand that we talked about earlier at the top is due to wealth creation, and we talked about the growth in 1950s and 1960s cohorts. So let’s tease out some of the impacts on housing for that. For instance, retirees, we referenced assisted care a minute ago. I briefly mentioned retirees, but are seeing, do you expect a boom in retirement communities and retirement demand?

Chris Porter:

It’s a mixed bag. You’ve got people that want to live in the 55-plus retirement communities. You’ve also got people who want to stay in a more conventional, traditional neighborhood at the same time. So I think there’s opportunity for growth there. Look, most people tend to stay in their own homes as they age. It’s a very small percentage that actually move. Maybe some of them buy second homes, but people don’t want to leave a community or a community environment that they’ve built up over years to move to somewhere maybe they don’t know anyone. So I think there’s a lot of opportunity for remodeling activity actually out of this as people realize that the home that suited them in their 40s and 50s maybe doesn’t suit them as well in their 60s and 70s, and by the way, the home is 20, 30 years older than it was. So there’s an opportunity, I think, here for a lot of remodeling activity of the homes that people still live in.

Dean Wehrli:

Over the last several years, we’ve talked more about how younger generations are doing things later. They’re moving out later, co-habitating later, married, having kids later. Is that still going on? Have you seen those trends change at all?

Chris Porter:

It is still going on, but I think you have to go back and look at this historically. So much focus got put on the Millennials because they were coming of age during the great financial crisis. They were such a big group. I think so much focus got put on them as, “Oh, they’re behind on everything.” But when you look at these trends over time, a lot of these trends have been going on for decades. Go back to the 1950s and 1960s and 1970s, and you see just that later adulting milestones, if you will. Look, there’s nothing unique about these generations. In many cases, they’re continuing those long-term trends. Yes, we are still seeing people getting married later. Some of that, they’re co-habitating though. They’re not necessarily getting married, but they’re living with a significant other. So that’s almost a substitute.

Dean Wehrli:

Still, you can see how that could impact things like bedroom count, for instance. If you’re having families later, there’s less of a need for high bedroom count, maybe smaller homes, that kind of thing?

Chris Porter:

You’re exactly right. You don’t necessarily need the same amount of space. You don’t necessarily need the same bedroom count. You may not need as big a yard. We always talked about that was an opportunity for people to live closer to the job centers. But now we’ve entered this world where more and more people are working from home. Do you really need to live close to the job centers? So it’s this really interesting dynamic that we’re going through right now where you’ve got these two competing forces.

Dean Wehrli:

You do, and you have another potential factor into that is, for lack of a better term, just that retail entertainment kind of profile. Is the stuff more likely still in the urban areas than is in the suburban areas that if you’re just a couple or a single, you’re still going out and things like that a lot? So are you still drawn to the urban areas for that reason rather than suburban areas where you can have a bigger house and work remotely?

Chris Porter:

Well, I think there’s two parts of that as well. Yes, there’s always that draw of the urban areas. But then as you’ve talked about or we’ve talked about on one of the earlier podcasts, there’s the surban concept, the idea that some of these same conveniences that you traditionally have in urban environments are now popping up more and more in the suburbs. Maybe that’s taken a little bit of a step back here in the last few years, but I still see evidence of that. In the suburbs, we’ve got these places that are walkable, retail and restaurants, and they do well.

Dean Wehrli:

Honestly, I think that’s growing. I think in the last few years there’s become more of that because I think you’re seeing more of those micro brews and places to hang out and have fun in suburban areas and not just in urban areas. That’s why I think… I am a big fan of surban products, a denser product in a suburban area, a suburban environment, than you would’ve formerly found. I think that’s a huge growth sector.

Chris Porter:

So in your view, are you actually seeing the residential component of that thrive as well?

Dean Wehrli:

A little bit, yeah. But then another thing that gets thrown in there is every city in the country wants to increase densities, so sometimes these builders are forced to increase those suburban densities even beyond where they normally want to do. It’s just a mixed bag of influences and pushes and pulls. Let’s talk divorce. That’s a terrible way to start a sentence. I apologize for that. Eric, do you want to talk about divorces? I think if I read it right, the divorce rate has been slightly decreasing as of late compared to-

Eric Finnigan:

That’s right.

Dean Wehrli:

What’s that doing with household formations or implications for housing there?

Eric Finnigan:

Well, it’s terrible news for housing. Good news for marriages, I guess, but bad news for housing. I think it’s a couple of things. One is that people are just getting married later. They have much more choice than 50 years ago.

Dean Wehrli:

It depends. It depends on their Tinder skills.

Eric Finnigan:

That’s right. That’s right. And also just fewer people getting married, so fewer people getting married, fewer people getting divorced. I know when I first got into housing research, my boss at the time was lamenting that his rental housing demand is not good because divorces are falling by so much. So there’s pluses and minuses to it.

Dean Wehrli:

I’ve told clients that, seriously. If one of your best friends is divorced, he creates another household. It can have impacts on housing in terms of, for instance, low maintenance. That single mom or even single person now wants something maybe low maintenance, and they might want it in a suburban area next to where they formerly lived to maintain schools or a friend set, something like that. Again, we come back to surban. Surban product can serve those folks very well.

Eric Finnigan:

That’s right.

Dean Wehrli:

Just a thought, I don’t know. I think we briefly mentioned this. People are more likely to live alone or live as couples whether they’re married or not. Is that a trend we’re seeing?

Chris Porter:

Well, I think you’ve got a lot of single households. You’ve got a lot of young adults who, again, are getting married later in life. On the other end of the age spectrum, you’ve got a lot of people who are living longer than their spouse and surviving, and out-surviving their spouse and still able to live independently, so you’ve got more one-person households at the older age spectrum as well. Then just based on our aging of our population, with people having kids later, they probably have fewer kids. So at some point you reach those empty-nester years. We’ve just got the population shifts going on right now that are more and more people moving into those empty-nester years. So, yeah, we do see an increasing share of households in the US is either single or married but no kids.

Dean Wehrli:

It strikes me then that also pushes towards the things like smaller homes, fewer bedrooms, surban product. You start to feel like there are some multiple reasons to push towards these kinds of product options and place options.

Chris Porter:

There’s certainly some opportunity there, I think.

Dean Wehrli:

Fewer kids, are we having fewer kids still? Is that still a trend we’re seeing?

Chris Porter:

It’s interesting. We have all these delays of getting married later and having kids later. Yeah, we’re actually seeing with these younger generations, at least at this point in their life, they’re having fewer kids than the previous generations did at the same age. It kind of remains to be seen where we end up. I’ve given the example in the past of my generation born in the ’70s actually had more kids than my parents’ generation did by the time they reached the end of their childbearing years. We caught up by the age of 35, but we were trailing them for a number of years. Now we’ve got the younger generations today who are really trailing compared to even my generation. There is a boundary. Even with technology, you can’t have kids past a certain age. Yes, I think generally speaking, if you look at the younger population today, they have fewer kids at the same age than prior generations did.

Dean Wehrli:

So fewer family buyers, again, lower bedroom count. Let me ask you this though. Maybe we forget that… Tell me if I’m wrong. Family buyers or family households are a little more likely to be in the buyer pool than singles and couples, I think, all else equal, at least age equal. Which could give families a little bit of an out-sized impact on for-sale housing relative to their numbers. Just throwing that out there.

Chris Porter:

For sure. I think if you look at, on the rental side, a family with kids is going to be more likely to want to rent a single family home as opposed to an apartment. So, yes, I think there’s definitely implications of the number of kids in your household and what housing choices you’re making.

Dean Wehrli:

Hence, build-to-rent being such a critical growing, surging sector over the last decade or so. Eric, let’s talk COVID. Eric, the last few questions have been divorce and COVID. I hope you appreciate that. During COVID, we saw so much more churn, we talked about that a minute ago, so much more folks moving. Didn’t that impact the rental market as well? Are we seeing that apartment churn on an upswing lately?

Eric Finnigan:

During COVID, a couple of things to point out. There was an uptick in moves of owner households, people moving from owned unit to owned unit, people moving from rental unit to owned unit, but people actually moving from rental to rental fell off pretty significantly. People were renewing their leases, turnover plummeted. Starting to see pick up in that recently, but still very close to just the historically lowest number of households that are moving in rentals.

Chris Porter:

I think part of that is driven by… Rents are increasing, and so if you’re able to lock in a lower renewal on a unit, then it would cost you to rent a new unit elsewhere. Some people are willing to do that and maybe stay in their rental a little bit longer. Also, during the pandemic, there were a lot of people who just didn’t want to move. It was just easier for them to stay in one place rather than have to go out and try to find a new place. So I think both of those also contributed to what we’d seen in the last couple of years.

Dean Wehrli:

Let’s finish up this episode with remote work, remote work, hybrid schedules. Remote and hybrid are still substantially higher rates than they were pre-pandemic. I was a little surprised by how much more substantial they were. Can you talk about that a little bit?

Eric Finnigan:

It’s about four times more work from home than before the pandemic.

Dean Wehrli:

I’m surprised it’s held on that long at that rate. We’re hearing more and more about return-to-office. I know that’s not going as smoothly as these large corporations want it to go or these cities too. The cities need those tax dollars desperately. But I’m still surprised it’s that high.

Eric Finnigan:

It turns out that, I think, workers like not commuting. For companies that do it well, there’s just as much productivity from people that work from home. They have better retention, less overhead expenses. I think it’s a real win-win. I think it’s actually going to be around for a long, long time. The impact on the housing market, it’s been massive in the last three years. It’s been four years since COVID. But I think it’s a long-term thing. For me, I don’t want to hype this up too much, but it’s on the level of innovation as something like a car. It let people move away from their offices, longer commutes back in the ’50s and ’60s, and I think now it’s having the same impact. That thing you mentioned, that phenomenon you mentioned earlier of people moving to neighboring counties or neighboring metro areas facilitated by work from home because people are actually willing to commute to the office two days a week a long distance if they can afford a home in lower cost areas.

Dean Wehrli:

I don’t know how well we can measure this and how finely we can measure this, but are we seeing growth in what I call those Goldilocks areas? That is, it’s not just remote work. It’s a lot of hybrid schedules, too, two or three days a week or something like that. That means you can’t move too far away. You certainly can’t move out of state. I’m here in northern California. I’m seeing some markets that are close enough to commute two days a week, but cheap enough we get a bigger house and more bang for the buck. Are you seeing that growth more generalized nationally?

Eric Finnigan:

Yeah. I think we can point out a lot of different metro areas where we can look at a map of the counties of that metro area and look to see where people that live in the metro area, where they’re moving to, where they’re moving from. What we see is just continued people moving from the denser urban counties into the suburbs and the exurbs further out from their offices.

Dean Wehrli:

Do we see any bounce back for urban in the near future?

Eric Finnigan:

Hard to say. I think there’s such a massive population of people that are going to be graduating college and entering their first rentership years, so first time householders. The other side of this from demand is supply. Where is all the supply going? It’s all in urban area, mostly in urban areas. I don’t want to exaggerate too much. But there’s going to be a massive supply and a massive incentive for people to actually move to cities into their apartments or move from their current units in a dense urban area to a building where they can get two or three months free rent.

Chris Porter:

I don’t think urban is dead. I think the churn that we’ve been so used to where people move into the cities in their 20s and they move out in their 30s and their 40s, that got really disrupted by COVID. Not so much that people weren’t moving out in their 30s and 40s, but it was people weren’t moving in their 20s in the same way. Just in talking with one of our clients of the day, he did say, “Yes, I’m seeing more of that young adult population now returning to the urban areas.” So I think that does get the churn back in a little bit more of a normal state. Also, I think the immigration numbers also help to benefit some of the urban areas as well. You see people gravitate towards the cities. Not that the suburbs don’t benefit as well, but we do tend to see more urban growth amongst the immigrant population, too.

Dean Wehrli:

Even places like San Francisco has actually seen their rents firm up very recently and add some life back in that city, which was very troubled for a while and certainly has some perceptions as well. Let’s end with one question from both of you. We’ve talked a lot about these core ways that demographics impact housing. Anything that you think has been overlooked in how demographics impact housing or just a demographic trend that has surprised you?

Eric Finnigan:

One thing in looking at more of this older population is that… This is going to talk a little bit about stats for a second. The average life expectancy in the country is around the mid-70s. But once you get older, once you reach past 30, past 40, past 50, you’ve eliminated all of the risks of dying young mostly from accidents. So someone that’s 60 years old today has a much longer total life expectancy, so they can expect to live another, call it, 27 years is what the number is. So 60-year-old today has a life expectancy of 27 more years.

Dean Wehrli:

It’s like eleventy-seven then by my math. Am I doing that wrong?

Eric Finnigan:

Exactly, yeah.

Dean Wehrli:

That’s so old. So Chris is right then. 85 is the new 65 or something.

Eric Finnigan:

Yes, it’s the new-

Dean Wehrli:

It’s Chris’s quote, so I don’t remember.

Chris Porter:

I think related to that, the thing that’s maybe surprised me, not totally surprised, but gosh, it makes a lot more sense now, it’s just this massive wealth creation and how much of that is owned by those people born before the 1970s. We calculate $107 trillion in net worth for people who are born in the ’60s and earlier. Yes, they have longer retirements that they’ve got to finance now, and so they need some of that extra net worth. But at the same time, they are buying homes. They’re out helping their kids buy new homes as well.

So I think we’re on the verge of this massive wealth transfer that is going to be the biggest in history. We’re already starting to see bits and pieces of that roll out. But really, if we look over the next couple decades, there is just a lot of wealth that will be transferred. Some of that, yes, is tied up in real estate and tied up in their homes. But I think the younger generations are going to have a little bit more of a leg up, if that, in the housing market. If truly they are inheriting some of this wealth, it’s going to help them get into their own home.

Dean Wehrli:

Since women live longer than men, your message is “Be nice to grandma because you need her.” Again, Chris’s quote. I just want to make sure everybody that that is attributed to Chris. Chris, Eric, thank you so much for coming on the show. Really appreciate it.

Chris Porter:

Thank you, Dean.

Eric Finnigan:

Thanks, Dean.

Dean Wehrli:

This is Dean Wehrli for the New Home Insights podcast. Thanks as always for listening. We’re happy you do, and join us again soon.

 

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