Shakeout Foreseen as Key Age Group for First-Time Homebuying Shrinks

By Timmons, Heather | American Banker, January 11, 1996 | Go to article overview

Shakeout Foreseen as Key Age Group for First-Time Homebuying Shrinks


Timmons, Heather, American Banker


A changing population mix may spell trouble for the mortgage industry as the United States approaches the millennium, some analysts believe. "Lenders have to get used to the idea of a lower demand for housing, and lower originations volume," said Nima Nattagh, a market analyst with TRW Redi Property Data of Anaheim, Calif.

According to figures compiled by TRW Redi from Census Bureau data, the percentage of the population in the 25-to-34 age group is going to drop significantly in the next four years. Nationally the drop will be about 8% drop, and declines will approach 20% in some northeastern states. Historically, most first-time homebuyers have been 25 to 34 years old. Consequentially, "the first-time buyer is going to decline in significance in the near future," Mr. Nattagh said.

This shrinking pie is going to mean an increase through the year 2000 in industry consolidation and in the number of players driven out of the business, Mr. Nattagh said.

Other observers agree that the prime buying group is shrinking, but they point to mitigating factors, including rising immigration. One important caveat, however, is that new immigrants often rent rather than buy, Mr. Nattagh said.

Another mitigating factor is that people are getting married, having children, and purchasing their first homes later and later. In fact, according to the Census Bureau, the average annual rate of growth of in the number of households has decreased in the last 20 years - from 2.4% in the 1970s to 1.1% in the 1990s. Many people continue to live alone, in rental units, for longer periods.

"The increase of the average age at which people purchase first homes will moderate the declining 25-to-34 population," said Rob Valletta, regional economist with the San Francisco Federal Reserve Bank. The degree of that moderation is not clear, he said.

Tom Cunningham, regional economist with the Atlanta Federal Reserve Bank, contends that the dearth of 25-to-34-year-olds means less to the housing market than the current position in the cyclical economic climate of the nation. …

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