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Financing Homes for an Increasingly Diverse AmericaSpecial Commentary from the Office of the Chief
Economist History books often refer to our country as a "melting pot," reflecting the people of different nationalities, races and ethnicities who have come to America. Migration trends remain strong in the 21st century, with legal immigration running at a rate of more than 1 million a year during 2001- 2003, about the same pace as during the previous decade. The U.S. Bureau of the Census and Harvard University’s Joint Center for Housing Studies have made projections of the changing face of American households over the next two decades. The racial and ethnic landscape of America’s families will continue to become increasingly diverse, these projections indicate. For example, today’s minority groups will comprise nearly one-half of the increase in homeowners between 2000 and 2020; nearly two-thirds of the increase in all households (including renters); and about four-fifths of the net gain in population. Further, Hispanic households are expected to be the fastest growing minority group, accounting for about one-half of the increase in minority households. Minorities Will Be Two-Thirds of Household Growth Immigration projections and differential birth (and death) rates by race and ethnicity are the primary drivers of these forecasts. As shown in Exhibit 1, one-quarter of all households were minorities in 2000. However, the Joint Center projects that minority households will represent about two-thirds of the net increase in households in the United States over the following 20 years. Immigration was particularly strong during the decade of the 1990s, averaging
almost 1 million legal immigrants per year, entering primarily from Latin and
South America and from Asia. Immigration representing this geographic mix is
projected to continue. The Joint Center used the Census Bureau’s latest
baseline projection: Immigration gradually declines from 1 million per year
in 2003, to 800,000 by 2010, then hovers between 800,000 and 850,000 per year
for the next decade. The Joint Center found that higher or lower levels of immigration
do not significantly affect its overall conclusions. The latest data on legal
immigrants continue to run above the Census Bureau’s baseline assumption,
increasing the likelihood that the Hispanic and Asian contributions to net household
growth will actually be stronger than indicated.
When first residing in the United States, nearly all immigrants are renters, but their homeownership rates rise with their length of time in the country and approach that of the native-born population after approximately 30 years. Exhibit 2 summarizes the homeowner and renter projections by race and ethnicity. The Joint Center projects the U.S. homeownership rate will rise at 0.4 percent per year (annualized) over 2000-20, leading to a 32-percent increase in the number of owner-occupants (based on 2004’s homeownership rate of 69 percent, then the projected number of homeowners would rise to 73 percent by 2020). Increases in number of owners are most striking for minorities; the number of black owners increases by twice the overall rate (64 percent), and the number of Hispanic owners more that doubles (a 111-percent gain). The number of renter households increases far less (4 percent) but is supported by immigrants of Latino and Asian ancestry. The projections indicate that the number of white households that rent their homes will fall, because of the aging of baby boomers and the smaller relative size of subsequent cohorts; homeownership rates rise strongly with age, and the boomers will be at their peak ownership years in 2020. In an analysis of the change in number of households by age of head of household and tenure, the Joint Center concluded that more than 90 percent of the 2000-to-2020 increase in homeowners reflects those where the age of the head of household is 55 or older – that is, homeowners that are either retiring or have already retired.
References Joint Center for Housing Studies of Harvard University, The State of the Nation’s Housing 2002, June 2002, Table A-6. Masnick, George S., Eric S. Belsky and Zhu Xiao Di, The Impact of New Census Bureau Interim National Population Projections on Projected Household Growth in the United States, Joint Center for Housing Studies of Harvard University Research Note N04-1, June 2004, Appendix B. U.S. Census Bureau, U.S. Interim Projections by Age, Sex, Race and Hispanic Origin, March 18, 2004, Table 1b.
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