Lawler on Demographics: Observations and Updated Population Projections

CR Note: This is a technical post, but the key take away for housing is: “the “demographics” are not nearly as positive over the next several years as the Census 2017 projections would have suggested.”

Way back in 2015, I projected a surge in homebuying in the 2020s based on demographics. The surge has happened, but the demographics are not as positive as originally predicted. Many analysts are repeating my earlier analysis without adjusting for less net international migration (NIM), and more deaths.

From housing economist Tom Lawler:

Analysts who rely on US population projections (total and by characteristics) to project other economic variables (including those housing related) have been frustrated by the lack of any credible official projections. The last official intermediate and long term population projections from Census was done in 2017, and (which I’ve written about before) those projections significantly over-predicted US births, significantly under-predicted deaths, and significantly over-predicted net international migration (NIM). On the latter score it’s not clear the extent of the over-prediction of NIM in the Census 2017 projections, as Census has not released updated NIM estimates for the 2010-2020 period. The last such NIM estimates were in the “Vintage 2020” population estimates, which did NOT incorporate the Census 2020 results, and the Vintage 2020 population estimate for April 1, 2020 was about 2.05 million below the Census 2020 tally. Presumably most of the Vintage 2020 “miss” reflected higher NIM over the past decade than that shown in the Vintage 2020 estimates, though the yearly differences in NIM are unknown, and Census has not yet released updated intercensal population estimates for the 2010-2020 period that are consistent with the Census 2020 results.

… some analysts like to look at projections of the number of 30 to 39 year olds, as that age group would likely include a large number of potential first-time home buyers. The Census 2017 Projections predicted that from July 1, 2020 to July 1, 2025 the number of 30-39 year olds would increase by 2,571,433, with a 697,200 increase in 2021. This updated projection has the number of 30-39 year olds increasing by only a third of that amount (864,670), with a 291,209 increase (from Vintage 2021) in 2021. The reasons for the big differences are (1) a different starting age distribution; (2) significantly higher deaths; and (3) significantly lower NIM. Obviously, the “demographics” are not nearly as positive over the next several years as the Census 2017 projections would have suggested.