Tuesday, October 21, 2014

How Does Geographic Diversity in Age Structures Impact Housing Market Dynamics?

by George Masnick
Senior Research Fellow
As the youngest of the baby boom generation has now turned 50, there is much talk about the overall aging of the U.S. population. But recently released Census Bureau population estimates for states and counties tell a more nuanced story about the diversity in age structures in the U.S.  The census release notes that the oldest county (Sumter County-FL) has a median age of 65.5, while the youngest (Madison-ID) has a median age of 23.1.  Quite a difference!  Other counties among the oldest include Charlotte-FL (57.5), Alcona-MI (56.9), Llano-TX (56.9), and Jefferson-WA (55.9).  The five youngest counties also include Radford City-VA (23.3), Chattahoochee-GA (23.9), and Harrisonburg City-VA (24.2), and Utah County-UT (24.2).  The U.S. median age is 37.6. 

We should perhaps not be surprised that the county with the oldest population is in Florida, or that Idaho and Utah, with their Mormon influences, should have the counties with the youngest populations. But what is going on in Michigan, Texas, and Washington counties to rank among the oldest, and in Georgia and Virginia to produce places with the youngest populations?

There are three main demographic factors that influence the age structure of a population: 
  1. Domestic migration patterns of both young adults and the elderly; 
  2. Settlement patterns of international immigrants; 
  3. Levels of fertility of both the immigrant and native born populations.  
Differences in life expectancy could also influence age structures if those differences are large.  For states and counties in the U.S., however, mortality differences are not sufficient to affect differences in median age. 

Places with net domestic out-migration of young adults, and/or in-migration of elderly will be older (younger if these migration patterns are reversed).  Florida is a destination state for retirement migration, as are North Carolina, Arizona, and other warm weather and low-tax states in the south and west.  Maine, West Virginia and many rust belt and Great Plains states lose young adults on net, so places in these states will also have an older age structure.

Immigrants tend to be young and have higher fertility compared to the native-born, so places that are immigrant destinations will be younger.  While states on the coasts and along our southern border still attract the majority of immigrants, states in the interior have increasingly become immigrant destinations as immigrant networks have spread beyond gateway states. 

Finally, fertility levels are the primary determinant of a population’s age structure.  When fertility is above replacement (more children born than reproductive-age adults in a family) the population pyramid is broader at the base, and median age is lower. The pyramid becomes more mushroom-shaped when fertility is below replacement, and median age is higher. 

When the population unit is relatively small, as with most of the counties listed above, these demographic factors can reinforce one another and create extreme values.  For larger units of population, such as large counties, metropolitan areas and states, differences should be less extreme, but they can still be significant. 

The population estimates from which median ages were calculated contain detail by race/Hispanic origin and sex, allowing us to examine the percent minority as a surrogate for the influence of immigration and the boost to overall fertility levels that immigrants and native-born minorities provide.  We can also look at a measure of recent total fertility by calculating the ratio of children age 0-4 to women in the primary reproductive ages of 20-44.  We cannot get a direct estimate of net domestic migration by age group from the published population estimates, however.  

The table at the bottom of this post, constructed from the 2013 population estimates, ranks states on median age, percent minority, and fertility.  While Florida has the county with the highest median age, the state as a whole is only the 5th oldest, surpassed by Maine, Vermont, New Hampshire and West Virginia.  The lower the percentage minority in a state, the higher the median age (Figure 1). The oldest states are those where young immigrants and native-born minorities with higher fertility have not settled.  Maine, Vermont, West Virginia and New Hampshire rank the lowest on percent minority. In addition, the lower the total fertility rate, the higher the median age (Figure 2). This second relationship is the stronger of the two that are graphed, and the relationship holds fairly well across the entire range of fertility (discounting DC as an outlier).  The New England states collectively are also near the bottom of the ranking on total fertility.

Source: U.S. Census Bureau Population Estimates

Older states may be destination states for retirement migration, but can also have lost young adults from out-migration to states with bigger cities and more job opportunities.  For example, according to the 2012 American Community Survey, Maine gained 27,500 residents from other states during the previous year, but lost 38,500.  If most of the out-migration from Maine were young adults, the effect would be to increase the median age.

The youngest states, however, are more of a mixed bag.  Utah’s very high fertility level – the highest in the nation – is sufficient to secure its ranking as the state with the youngest median age. Utah is not completely lacking in diversity - its percent minority (20.3%) is just the 18th lowest, but the total fertility rate in Utah is primarily driven by its non-Hispanic white population’s high rate of childbearing.  Alaska, the second youngest state, has a large minority population (mostly native Alaskans), as well as levels of fertility that are well above the U.S. average.  Its young ranking, however, is likely also determined by in-migration of young adults to work in energy and nature oriented jobs, and out-migration of the elderly to warmer climates.  The District of Columbia has achieved its ranking as the third youngest in all likelihood because of in-migration of young adults to work in Washington for a spell.  These adults are largely single, as suggested by DC’s extremely low fertility. But also contributing to DC’s young age structure is the fact that the percent minority is the highest on the mainland (64.2%).  Texas is the 4th youngest state, both due to its high percent minority (56%) and high fertility.  Texas has received consistent growth from both immigrants and young domestic migrants in recent years.  The final state among the top five youngest is North Dakota, which has been the beneficiary of considerable in-migration of young adults to work in the booming energy sector in the western part of the state.  North Dakota’s fertility rate is also among the highest, attesting to the impact of a favorable economy on family formation.   

Geographic diversity in age structures has direct implications for housing market dynamics.  Places with younger age structures will require new construction to house young adults, both now and in the future.  If the young age structure is created by higher fertility, homes will need to be larger to accommodate larger families.  If the younger age is created by in-migration of singles, a different housing mix is required, at least in the short run. 

Places with older populations are expected to show a greater balance between supply and demand for existing housing.  An older age structure brought about by low fertility and out-migration of young adults will have less need for new construction.  This is especially true if the existing housing is located in places where young adults want to and can afford to live.  However, if future demand for existing housing by young adults or older in-migrants is not there, older adults may be less able to sell their homes, and we can expect higher rates of aging in place. In these places there would be a greater need for modification and upgrading of existing housing to help the elderly safely stay in their homes.  On the other hand, if the older age structure is primarily the result of in-migration of retirees, and if that in-migration is sustained, there will be more opportunities for new construction and for the elderly to sell their homes in order to adjust their housing needs.  

Source: 2013 Census Bureau population estimates for states and counties.
*Fertility Rate is the number of children age 0-4 per 1000 women age 20-44. 

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