Step 1 – Universe of Records
The universe of records constitutes the total number of single-family households located within the primary marketing area.
Step 2 – Reduction to Age and Income Qualified Households
The minimum qualified household income bracket is $50,000 per year. The universe of records is then reduced by the income-qualified households and stratified by age group providing the total age-qualified households in the primary marketing area.
Step 3 – Reduction of Pool to Buyers of Specific Housing Intended-Uses
An analysis of the non-multifamily rental market determines what percent of the single-family space is made up of renters.
Step 4 – Rental Vacancy Rate, Multifamily
An analysis of the vacancy rate of multifamily units determines how much demand remains for single-family rentals.
Step 5 – Population Forecasts
Households form the basis for housing demand, so converting population to households is our next step. Here, we use the headship rate (the household to population ratio) to forecast household formation, which will also depend on the age distribution. The variation in population growth across different age groups is also important for housing considerations.
Step 6 – Headship Rate by Age Cohort
An analysis of household vs population by age group indicates which age cohorts are currently making up the majority of housing demand, and which age cohort will become the source of future housing demand.
Step 7 – Forecasted Household Growth
A projected increase of households indicates how much “new demand” will be available in the future.
Step 8 – New Housing Permit
Economic growth provides an incentive for new development, but economic improvement will also encourage some households to return to home ownership due to better employment conditions.
Step 9 – Affordability and House Price
In our scenario analysis, we try to capture future housing affordability with assumptions regarding employment, mortgage rates, and household income.
Step 10 – Forecast: US Home-ownership Rate
A swing in either direction in the home-ownership rate will have an impact on the rental market conditions.
Step 11 – Forecast: New Multifamily Demand
In this analysis, we investigated the relationship between economic trends and the rental market at the national level, assuming no housing policy changes. Based on our framework that focuses on the entire residential market, we developed an indirect approach to forecast future home-ownership and new single-family demand. The analysis considers the impact of multifamily units on the single-family rental demand.