The outlook for housing: the role of demographic and cyclical factors

With the current U.S. economic expansion now in its sixth year, the economy appears to be on a path of stable growth. Such a development would be beneficial because it would foster steady gains in employment, income, and investment, all of which would help boost the overall standard of living. To maintain such a healthy course, most sectors of the economy need to be solid performers. The housing sector is an especially important component of the economy, having generated $1.5 trillion in output in 1995, or one-fifth of the nation's gross domestic product.> Whether housing activity will continue to perform well in the 1990s will depend in part on two key factors. First, will demographic factors, such as the aging \\"baby-boom\\" generation and the smaller \\"baby-bust\\" generation, lessen the demand for housing and thereby imperil the health of housing activity? And second, will cyclical factors enable housing activity to sustain its solid performance as the economy moderates to a stable growth path?> Filardo explores whether housing will continue to perform well in the rest of the decade. He concludes that favorable demographic trends and stable cyclical forces will lay the foundation for healthy housing activity for the rest of the decade.