The U.S. population has experienced remarkable growth since 1950. The base in 1950 was about 152 million Americans; an additional 156 million persons were added to the population between 1950 and 2009. This increase of about 103 percent in the size of the U.S. population is remarkable compared with other industrialized countries. The US has seen a slowdown in growth as other countries, such as Pakistan and Nigeria’s populations have exploded.
The Census Bureau projects that the US population will grow to almost 440 million by the year 2050, a slower pace than the last century.
This means that household formation will continue to happen and that there will be opportunity in the long run. But where are the opportunities in the next ten to twenty years? They will stem from the change that is coming from our aging population as the Congressional Research Service white paper states in, “The United States is Getting Older.”
The US population in the first half of the 20th century was relatively “young.” To put that in perspective, in 1950- 91.9 percent of people were under the age of 65. In 2009 87.2 percent were under the age of 65 and in 2050 it is projected that only 79.8 percent will be under the age of 65. In other words, in the year 2050, one in every five people in the US will be over the age of 65.
This will change what housing looks like.
A large majority of older Americans want to remain in their homes and more importantly in their communities. The homes they raised their families in might not suit their purposes any longer so what are their options? In 2005 (before the housing crises) a survey was taken by AARP of adults over the age of 50. They reported that the homes they currently lived in wouldn’t accommodate them “very well” as they aged. So these seniors have a push pull of wanting to “age in place” yet their homes aren’t suitable for them to remain independent.
Seniors in the early stage of making a housing transition will remain in owner-occupied or rental housing and live independently. Only about 4.7 percent live in a group home and 7-10 percent live in a senior facility.
I see group homes as an area of opportunity. Group homes could become the answer for many seniors. I have been preaching for the last year or two that new homeowners aren’t looking for McMansions. New buyers (Echo Boomers and younger) want something simpler that gives them more flexibility. So what will happen to these McMansions? Group homes could be perfect. Many of these homes were built with private baths attached to each bedroom, large kitchens and great rooms. These homes can be adapted for disabilities by adding lifts and rails in bathrooms, for example. Then these homes can operate very well as group homes. This can give seniors the option to stay within their community, but not be isolated. Not to mention it’s a cash cow for investors. I’ve seen these kind of properties create a 100% positive cash flow (this would include covering the debt service).
As seniors make the inevitable change, they will release much more housing than they absorb, but it will be absorbed by newly formed households. For example, between 2000 and 2010 people who began the decade age 55+ moved out of 10.5 million housing units. Most of these were owner-occupied dwellings. During the same period, households grew (under the age of 55) by 21.8 million. Thus leaving about 11.2 million new households needing housing. Take into consideration that forty percent of this time was during a major recession where we saw much slower household formation.
What does the next decade look like? It’s projected that 14.4-15.0 million housing units will be released between 2020 and 2030. Of these releases it’s estimated that 80 percent will be single family detached dwellings.
Interesting times are coming with lots of opportunity if we are willing to see the changing landscape.