A Word of Caution about Census Bureau Projections

by George Masnick
Fellow

The Census Bureau recently released its high and low immigration series population projections going out to 2060, complementing its middle series released in December 2012.  Among the talking points in the press release announcing the projections was the assertion that the high immigration series “projects that the U.S. resident population will become majority-minority by 2041, two years earlier than the December (middle series) projection of 2043.”

The point is well taken that the growth of the minority population depends upon future levels of immigration, and higher immigration means an earlier date at which the country becomes majority-minority. But between now and the 2040s there is a great deal more uncertainty about immigration trends than is captured in the Census Bureau’s latest assumptions, including uncertainty about how attitudes and norms will affect who is counted as minority.  In addition, all three of the Census Bureau’s population projections use the same assumption about projected fertility levels of each race/Hispanic origin group.  Not only are fertility trends difficult to predict over many decades, but different immigration levels will surely affect fertility rates.

The new middle series immigration assumptions trend from 725,000 per year in 2012 to 1.2 million in 2050. Low assumptions trend from 702,000 to 808,000, and high assumptions from 747,000 to 1.6 million annually.  All three immigration assumptions are well below those of the previous Census Bureau population projections released in 2008 and 2009, with the new high immigration series even projecting fewer immigrants in 2050 than the previous low immigration assumption (Figure 1). Such a wide range of uncertainty about future levels of immigration should make one wary about the reliability of projections that reach almost 50 years into the future.

Source: U.S. Census Bureau 2009 National Population Projections

However, the projected level of immigration is not the only area of uncertainty that will affect the projected white-minority tipping point.  Predicting a specific year when the population actually becomes majority-minority sometime three decades ahead will also require assumptions about how Americans in the future will identify themselves in terms of race and ancestry.

Perhaps the most important wild card is the growing rate of inter-ethnic/race marriages, particularly when one parent is non-Hispanic white and the other is not, both because the rates of intermarriage will help determine the future minority composition of the population and because it is unclear how the children of such unions will be classified in future censuses and how they will self-identify as adults.  According to a Pew Research Center report, among all newlyweds in 2010, 9% of whites, 17% of blacks, 26% of Hispanics and 28% of Asians “married out."  Most of these marriages involved one partner who was non-Hispanic white. The same report notes that during the past 25 years, public sentiment about inter-marriage has changed markedly: in 2010, nearly two-thirds of Americans said it “would be fine” with them if a member of their own family were to marry someone outside their own racial or ethnic group, while in 1986, two thirds of the population held the opposite view.  During the next 25 years, marrying out is likely to become even more common and more widely accepted.

Such trends in inter-marriage tell only part of the story regarding inter-racial childbearing, however. The percentage of births that are non-marital has been increasing steadily since the 1940s, and the greatest increases have taken place in recent years.  Today, 36 percent of all births taking place in the U.S. are non-marital, with much higher percentages among teens (86 percent) and women in their early 20s (62 percent). Given that younger cohorts are more favorably disposed to inter-racial relationships, many of which result in childbearing outside of marriage, the statistics on inter-marriages in the Pew report could well underestimate the implications for future inter-racial/ethnic childbearing.

The number of inter-marriage/partnerships taking place over the next 30 years, the number of children born to these relationships, and how the race/ethnicity of these children get classified in censuses and surveys will fundamentally affect the share of the population that is identified as minority.  More importantly, how these children will self-identify as adults in 2040 is basically unknown.  Census Bureau population projections tacitly assume that this variable is held constant at today’s levels, and that young adults will self-identify in the future the same way that they were identified as children by their parents.

A strong argument has been made that racial and ethnic identity is highly variable over time and depends upon social and political conditions. In 1970, the question on Hispanic origin was added to the Decennial Census, and in 1980 the question on ancestry, both after concerted political lobbying by Latinos in the case of the former and those of European descent for the latter.  The Asian community successfully lobbied to expand the number of Asian options listed in the 1990 census. However, since then the percentage of the population whose ancestry was not identified by the census has increased, slightly between 1980 and 1990, and dramatically between 1990 and 2000 (increasing from 11 percent to 20 percent).  In 2010 the ancestry question was shifted to the American Community Survey.  In that survey ancestry was unidentifiable or not reported for about 12 percent of the population, but only after a persistent effort with follow-up interviews with respondents having not answered this and other questions. Such follow-up was not conducted for the 2000 census.  

In short, ancestry appears increasingly to be less important in how Americans identify themselves. And if ancestry, and perhaps by extension race and ethnicity, becomes less important in how we self-identify as Americans, it is entirely likely that in 30 years the percent minority will become a statistic that has become less robust.  Specifically, fewer persons of Hispanic origin might check that box. Likewise, fewer of mixed-race ancestry might identify as such.

A third way that the majority-minority tipping date might be influenced are the apparently arbitrary definitions of whom the Census Bureau counts as minority.  For example, immigrants from Brazil are not counted as minority (Hispanic/Latino) because of Portuguese ancestry, even though most Brazilians also have some indigenous South American native ancestry.  Persons with ancestry in the Middle East and in North Africa are also categorized as white. But a future OMB directive could require that these persons be counted as minorities.

Finally, it has already been demonstrated that such simple factors as questionnaire wording, order of asking questions about nativity, race and ethnicity, and examples used as prompts to questions, will all influence responses.  It is very unlikely that current questionnaire protocols for these items will be used decades in the future.

While there is a lot of uncertainty about the projections 30-50 years into the future, the new projections for the next 10-20 years are likely to be much more accurate.  And they are extremely valuable for showing the magnitude and importance of different immigration assumptions for relatively near-term trends in population growth and for broadly understanding the changing age, race and ethnic composition of the population. Longer-term trends in race and ethnic composition will depend as much on fertility levels, on rates of intermarriage, and on how we think about others and about ourselves, as it does on actual immigration trends.

A Housing Recovery, but Not for All Americans

by Eric Belsky
Managing Director

Driven by rising home prices and growing demand, the U.S. housing recovery is well underway, according to our latest State of the Nation’s Housing report released today. While still at historically low levels, housing construction has finally turned the corner, giving the economy a much-needed boost. But even as the recovery gains momentum, millions of homeowners are still delinquent on their mortgages or owe more than their homes are worth, and severe housing cost burdens have set a new record.

Driven by an increase of 1.1 million renter households, last year marked the second consecutive year of double digit percentage increases in multifamily construction. But the flip side of the strong rental market was the continued slide in homeownership rates. Even as historically low interest rates have helped make the monthly cost of owning a home more favorable than any time in the past 40 years, the national homeownership rate fell for the eighth straight year in 2012. The drop was especially pronounced for 25–54 year olds, whose homeownership rates were at their lowest point since recordkeeping began in 1976.

Note: White and black households are non-Hispanic; Hispanic households can be of any race.
Source: JCHS tabulations of US Census Bureau, Current Population Surveys.

Tight credit is also limiting the ability of would-be homebuyers to take advantage of today’s affordable conditions and likely discouraging many from even trying.  At issue is whether, and at what cost, mortgage financing will be available to borrowers across a broad spectrum of incomes, wealth, and credit histories moving forward.

And while the recovery is good news for many, the number of Americans shelling out half or more of their incomes on housing is at an all-time high. At last count, 20.6 million households were shouldering such severe burdens, including nearly seven out of ten households with annual incomes of less than $15,000 (roughly equivalent to year-round employment at the minimum wage). But, the report notes, even as the need has never been greater, federal budget sequestration will pare down the number of households receiving rental housing assistance.

Notes: Severely cost-burdened households spend more than 50 percent of pre-tax income on housing costs.  Incomes are in constant 2011 dollars, adjusted for inflation by the CPI-U for All Items.
Source: JCHS tabulations of US Census Bureau, American Community Surveys.

With rising home prices helping to revive household balance sheets and expanding residential construction adding to job growth, the housing sector is finally providing a much needed boost to the economy, but long-term vacancies are at elevated levels in a number of places, millions of owners are still struggling to make their mortgage payments, and credit conditions for homebuyers remain extremely tight. It will take time for these problems to subside. Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families, and entire communities, efforts to address these urgent concerns as well as longstanding housing affordability challenges should be among the nation’s highest priorities.

Download the 2013 State of the Nation's Housing report.

Watch our webcast of the report's release.

Failure to Launch

by Dan McCue
Research Manager

With graduation season behind us, millions of newly minted college graduates will be returning to live in their parents’ homes. For some, it won’t be just for the summer. According to the US Census Bureau’s American Community Survey, at last count in 2011, fully 41 percent of college graduates under age 25 lived at home with their parents (Figure 1) along with 18 percent of graduates aged 25-29.

Source: JCHS tabulations of US Census Bureau, 2011 1-Year ACS.

As the figure shows, many college graduates have come to be known as “boomerang children” - those who, instead of venturing out and forming their own household after graduating college, return to live with their parents.  Since the recession began, the term boomerang children has become well known, largely because the situation has become so common.

Source: JCHS tabulations of 2007 and 2011 1-year ACS.

In 2011, there were 16.5 million 18-24 year olds living with their parents and another 4.9 million aged 25-29.  Combined, that’s over 2.9 million more young adults living with their parents in 2011 compared to four years earlier, before the Great Recession. While population growth has helped lift these numbers, the increase in the share of young adults living with their parents in 2007-11 has meant that, among those aged 25-29 alone, there were nearly a million (945,000) more adults living with their parents in 2011 than there would have been had 2007 population rates held constant, while for adults aged 18-24, there were fully 1.2 million more.

Such large numbers living in what many parents and children alike would call an unsustainable situation are why boomerang children are now being looked at as a possible boon to household growth.  As these young adults start to move out of their parents’ basements, they add so-called “pent-up” demand on top of normal household growth. However, a pent-up demand estimate requires an assumed return to earlier “normal” rates – and what is to be considered normal is a tricky thing to determine these days.  For example, if the change in rates of adult children living with their parents in 2007-11 had not occurred, 1.5 million more adults under 30 would have been heading independent households in 2011.  Assuming no change in rates in 2000-11 would lead to even higher estimates of pent-up demand.

Although a return to 2000 or 2007 rates may or may not be in the cards, mere stabilization of current rates will help household growth rebound. Indeed, population growth among 18-29 year olds was expected to push up the overall number of households by over 400,000 in 2007-11; it was the drop in rates of headship that led to the significant declines. With no more drops in rates of household headship, and no more increases in shares of adults living with parents, then population growth can take over again and return significant household growth levels among young adults, regardless of pent up demand. This fall, data releases from the Census Bureau and the Bureau of Labor Statistics will provide updated information that will shed light on whether or not such stabilization is starting to occur or, alternatively, if rates are heading in one direction or another.  Perhaps then we’ll be blogging about the growing number of empty-nester households. 

Strong Demand for Rental Housing Driving Gains in Multifamily Construction

by Ellen Marya
Research Assistant

As the housing recovery gains momentum, one encouraging sign has been the strong return of multifamily construction. According to the Census Bureau’s Survey of Construction and Building Permits Survey, construction on 245,300 multifamily units was started in 2012, the most since 2008. (Figure 1) The surge in construction activity is only beginning to result in new supply on the market given the long lags from the time a project is conceived until construction is completed (only 166,000 units in multifamily buildings were completed in 2012, just slightly above the low point in 2011). But looking ahead, multifamily construction will continue to accelerate, as permits for over 310,000 multifamily units were issued in 2012, also the highest level since 2008. 

Source: US Census Bureau, New Residential Construction.

Gains in permitting have been widespread: three-quarters of the 100 largest metro areas accelerated their multifamily permitting in 2012. Nationwide, the multifamily rebound is outpacing improvement in the single-family market. Multifamily permitting was up over 51 percent between 2011 and 2012, more than twice the gain in single-family permits and the third consecutive double-digit increase. The rapid recovery in the multifamily sector has led to speculation that some markets may be in danger of overbuilding. But while recent gains are dramatic, a longer-term view of both supply and demand indicates that such concerns are likely overblown—at least for now.

Current increases in multifamily permitting are from historically low levels. From a peak of over 473,000 units in 2005, multifamily permits decreased by more than 70 percent to 142,000 in 2009, the fewest in 25 years. In the context of these drastic swings, permitting is just beginning to return to levels in line with long-term averages. Nationwide, in 2012, nearly 81,000 fewer multifamily units were permitted than the average annual level from 2000 to 2009. Permitting in 34 of the 100 largest metros did top average levels from the 2000s in 2012, including seven of the top ten highest permitting areas (Figure 2).

Source: JCHS tabulations of US Census Bureau, New Residential Construction.

This boost in supply is occurring in conjunction with rapidly growing demand for rentals. Nearly 93 percent of multifamily units completed in 2012 were rentals, the highest level in decades. According to the Housing Vacancy Survey, the number of renter households increased by over 1.1 million between 2011 and 2012, marking the eighth straight year of renter growth. Rentership was especially strong in each of the top ten highest permitting areas, where growth in renter households outpaced overall household growth between 2010 and 2011, the most recent years with metro-level data available from the American Community Survey. In total, these ten metros added 154,000 households between 2010 and 2011, but the number of renter households increased by nearly 268,000.

Additional signs indicate strong rental markets in these highest permitting areas. According to MPF Research, vacancy rates in professionally-managed apartment complexes were near or under 5 percent in eight of these markets as of the fourth quarter of 2012. Monthly rents in the ten markets were up an average of 3.6 percent in the fourth quarter of 2012 from the same quarter a year earlier, compared to 3.0 percent nationwide. As construction timelines for multifamily buildings often span several years, market conditions will continue to develop during the lag between permitting and completion of new units. However, generally tight markets and enduring renter growth suggest that the robust return of multifamily construction currently represents a response to rising demand, rather than the formation of a new bubble.

Are More Older Americans Retiring with Mortgage Debt?

by Irene Lew
Research Assistant

As the first wave of baby boomers prepare for retirement, it would be easy to assume that they’ve paid off their mortgage and credit card debt. However, data from the Census Bureau’s Survey of Income and Program Participation (SIPP) shows that older Americans today are grappling with mounting debt levels, even into their retirement years.  Among households aged 55 to 64, total median household debt jumped from $42,654 in 2000 to $70,000 in 2011—a 64 percent increase—while households aged 65 and over are now carrying more than twice the amount of household debt they were carrying a decade ago.  Even more surprisingly, older Americans had a larger increase in total median household debt than younger households, with the amount of total median household debt among householders under the age of 35 growing by a relatively modest 13 percent between 2000 and 2011.

Note: Percent changes are based on 2011 dollars.

Source: US Census Bureau, Survey of Income and Program Participation (SIPP), 1996 and 2008 Panels. 

The increase in debt among older Americans has been driven by a spike in the number of households who hold secured debt, which includes mortgages and home equity loans, even into their retirement years. According to data from the Survey of Consumer Finances, the share of households aged 65 and over with mortgage debt has nearly doubled over the past 20 years, from 21 percent in 1989 to 40 percent in 2010; among households aged 55-64 during the same time period, the share grew from 46 percent of households in 1989 to 69 percent in 2010. Just between 2001 and 2010, there was a 10 percent increase in the share of households aged 55-64 with mortgage debt and a 14 percent increase in the share of households aged 65 and over with mortgage debt.

Source: JCHS tabulations of Survey of Consumer Finances. 

It’s not just that more seniors are carrying mortgage debt; they are also saddled with much higher mortgage debt than they were carrying 20 years ago.  Although the median mortgage debt of all homeowners who are still carrying mortgage debt has increased from nearly $54,000 in 1989 to $109,000 in 2010, among homeowners aged 65 and over there was a 76 percent increase in the median amount of mortgage debt, from $15,180 in 1989 to $63,000 in 2010 (after adjusting to 2010 dollars).

While the dramatic rise in the share of older Americans with mortgage debt is partly the result of easily-accessible credit before the Great Recession (when many Americans took out home equity loans, extended mortgage terms, or refinanced their homes and took out cash), there is also evidence that older households were not spared from the Great Recession. A 2011 AARP study points out that, post-recession, a larger share of older homeowners with mortgages, particularly those with incomes below $23,000, are paying 30 percent or more of their income for housing costs. In fact, 96 percent of homeowners aged 50 and older with mortgages, who have incomes under $23,000, pay 30 percent or more of their income for housing.

Furthermore, a recent report from the Consumer Financial Protection Bureau (CFPB) indicates that more senior households are taking out reverse mortgages. According to the report, 70 percent of reverse mortgage borrowers in 2010 opted to take the full amount of the loan as a lump sum at closing, up from just 2 percent of borrowers in 2008. While data is not available on how they use these funds, this dramatic increase raises concerns about whether borrowers will have sufficient financial resources to cover their expenses later in life.