Onshore Energy Conference — Dubai Onshore Energy Conference — Dubai 02 | Page 47

THE P H REPORT
Rising home prices have
probably become a major
barrier to increasing
home ownership
US HOME OWNERSHIP %
NOT SEASONALLY-ADJUSTED 1956 ONWARDS
69
68
67
66
65
64
63
62
62.9% IN Q2 2016
= ALL-TIME LOW
WELCOME HOME
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THE PERCENTAGE OF 18 TO 34-YEAR-OLDS
LIVING WITH PARENTS AND OTHER
FAMILY MEMBERS HIT A 75-YEAR HIGH
Source: The pH Report, US Census Bureau
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▲ Chart 9
US homeownership
hit an all-time low
in Q2 2016
2015:
39.5%
40
30
20
10
0
Chart 10
The percentage
of 18-34 year olds
living with a family
member is at a
75-year high
The MBA’s argument for a disconnect
between new home demand and
refinancings is based, like other
forecasters, on an expectation of rising
job growth coupled with higher wages and
rising house prices. But the problem with
this argument is that housing patterns
are changing quite dramatically due to
demographic influences.
One sign of this, as chart 8 confirms,
is that the ratio between single and
multi-home starts has returned to pre-
SuperCycle levels. The BabyBoomers no
longer need large homes in the suburbs
in which to bring up their families. As a
result, one-third of new starts are now
multi-unit, compared to around a fifth in
the 1987 – 2010 period. Equally important
is that housing starts have already started
to plateau over the past 2 years.
They had risen sharply from 587k in 2010
to 1 million in 2014, but since then growth
has been tepid, with total starts only rising
to 1.17 million in 2016.
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BY DECADE
63.5% IN Q4 1985 /
Q1 1986 & H1 1988
’0
62.9 – 64.1%
1965–1968
61
70
US homeownership also remains
in steady decline, with the Clinton/
George W Bush goals of 67.5% rates now
seeming to belong to a different era. One
key issue is simple affordability. Counter to
the MBA’s hopes, rising home prices have
become a major barrier to increasing home
ownership. As chart 9 shows this fell to an
all-time low in Q2 2016 of 62.9%.
One result is highlighted in Chart 10
from the Wall Street Journal, which shows
the percentage of 18 – 34 year-olds living
with parents or family members is at a 75-
year high. According to the Harvard Joint
Center for Housing Studies:
“The number of adults under age 30
has increased by 5 million over the last
decade, but the number of households for
that age group grew by just 200k over the
same period.”
ANNUAL
NOTES: 1900 to 1970 data are from the Decennial Census records,
1980 to 2015 from Current Population Survey; including stepparent,
grandparent, other relative(s).
Sources: US Census Bureau; Trulia. THE WALL STREET JOURNAL.
Of course, it is also possible to argue
that these statistics suggest that there
may be considerable “pent-up demand”
amongst millennials for their own home.
The problem is that demand can remain
“pent-up” for a long time, if cash is not
available to make the purchase. And the
evidence would suggest affordability is
likely to get worse rather than better in
future years, due to the ‘two nation’ split
that we described earlier. As we noted in
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