Final Project: The Impact of COVID-19 and Other Recent Demographic Changes on the Housing Market: A Case Study of Boulder, CO
Within the constantly changing relationship between supply and demand in the housing market, few factors hold as much sway as demographics. From shifts in population dynamics to evolving preferences among different age groups, these silent architects quietly alter the foundations of our communities.
As we find ourselves amidst a period of unprecedented change, the forces driving demographic transformation have taken on new urgency and significance. The seismic effects of the COVID-19 pandemic have reshaped our lives and societies, illuminating the intricate relationship between demographics and housing markets.
In this analysis, we dive into various demographic shifts and their effects on housing markets, while also examining the influence of COVID-19. By exploring the connections between population dynamics and housing trends, we can shed light on the hidden forces shaping our communities and chart a course for the future.
Massive Recent Changes on National Demographics
Recently, national demographics have changed so much. Migration patterns have shifted as foreign individuals and families seek new destinations offering safety, space, and opportunity. Remote work has broken down geographical barriers, ushering in an era of flexibility that promises to redefine the concept of work culture.
Between 2020–2024, immigration into the U.S. experienced a notable upward trend, contributing significantly to the population dynamics. The Congressional Budget Office has great data on the topic. From 2022 to 2024, net immigration figures steadily climbed from 0.79% to 0.96%, marking a period of heightened influx of individuals and families into the country. This influx has also effected the rising population growth. This surge in net immigration growth suggests that the increase played a significant role in driving overall population expansion in recent times.
The COVID-19 pandemic precipitated a massive shift in work culture, with remote work emerging as a defining feature of the new normal. As companies adapted to social distancing measures and sought to ensure employee safety, the prevalence of remote work skyrocketed, fundamentally altering the way millions of individuals approached their professional lives. Workers across a variety of industries found themselves navigating a new frontier of flexibility and connectivity. This unprecedented rise in remote work not only reshaped the physical landscape of workspaces but also revolutionized traditional notions of work-life balance and geographical constraints. As the pandemic unfolded, remote work evolved from a temporary necessity into a permanent fixture. Only now are some businesses starting to reduce their work from home options. The National Bureau of Economic Research has data surrounding WFH statistics.
The convergence of increased immigration and the rise of remote work has had profound effects on housing markets, reshaping demand, and preferences in unprecedented ways. The influx of immigrants, drawn by economic opportunities and quality of life factors, has fueled demand for housing in destination cities, driving competition and putting pressure on housing affordability. Simultaneously, the widespread adoption of remote work has untethered workers from traditional geographical constraints, enabling them to seek housing in areas previously deemed impractical due to commute times or proximity to urban centers. This has led to a decentralization of housing demand, with suburban and rural areas experiencing newfound popularity among remote workers seeking space, affordability, and a higher quality of life. As a result, housing markets have witnessed shifts in preferences towards larger homes with dedicated office spaces and outdoor amenities, reflecting the evolving needs of remote workers.
Recent Inflationary Pressures:
Inflation surged notably from mid-2021, reaching alarming levels by the end of the year. This uptick in inflation persisted through 2022 before finally showing signs of moderation in 2023 when the federal reserve stopped rate hikes. The sharp increase in inflation rates during this period had far-reaching implications, significantly impacting affordability, and housing markets. As the cost of living soared, households faced mounting financial pressure, particularly those with fixed incomes or limited resources. This inflationary environment exacerbated existing challenges in housing affordability, with rising prices and shrinking purchasing power squeezing many potential homebuyers out of the market. Moreover, the demographic landscape felt the ripple effects, as younger first-time homebuyers and lower-income individuals found themselves disproportionately burdened by the rising cost of living. In the housing market, inflation-induced affordability constraints compounded existing supply shortages, intensifying competition, and driving prices even higher.
Case Study: Boulder, CO
The nationwide demographic shifts and housing market transformations have had ripple effects felt in neighborhoods across the country. However, the impact of COVID-19 on our community in Boulder, CO, has been particularly significant, reshaping both demographics and the local housing market.
Demographics
First looking at income distribution comparisons between Boulder, the state of Colorado, and U.S., we can see valuable insights into the socioeconomic landscape. Compared to both the national and state averages, Boulder exhibits unique patterns reflective of its affluent and diverse population. Notably, Boulder County boasts a higher proportion of residents earning $200,000 or more annually, with a substantial 20.65% falling into this category compared to 11.46% nationally and 14.71% statewide. This suggests a significant concentration of high-income earners within the county, likely attributable to its status as a hub for technology, research, and academia. Conversely, Boulder’s lower-income brackets, particularly those earning less than $50,000 annually, demonstrate a smaller share compared to the national and state averages, indicating a relative affluence and higher cost of living within the region.
Boulder’s population has exhibited a steady trajectory of growth over the past decade with a slight dip in recent years. The onset of the COVID-19 pandemic in 2020 introduced unprecedented challenges and disruptions to this trend. While Boulder continued to see population growth in the years following, the pandemic undoubtedly left its mark, influencing migration patterns, economic activity, and social dynamics within the city. However, pulling back to a wider view, from 2009 to 2022, the total number of residents rose from 100,160 to 105,482.
Housing Market
Zooming in on vacancy rates reveals a pivotal metric that serves as a barometer for housing supply and demand dynamics, geographic expansion, and various other socioeconomic indicators. Boulder County’s trajectory unveils a common narrative: the steady decline in vacancy rates from 2008 to 2016 reflected the nation’s recovery from the Great Recession, a turbulent time that heavily impacted the entire U.S. economy, but specifically real estate and the housing market. However, the onset of COVID in 2019 marked a stark reversal. Vacancy rates surged by an alarming 58% year-over-year, escalating to 5.53%. The following year of 2020 bore witness to another sharp uptick, reaching 6.19%. The pandemic’s economic fallout, compounded by widespread job losses, led to a cascade of housing insecurities, massively increasing tensions and the strain on available housing stock. The actual number of vacant housing units in Boulder County skyrocketed by nearly 62%, surging to 7,716 in 2019, underscoring the profound impact of COVID-19 on the local housing landscape. Surges in vacancy rates can lead to a number of collateral effects that reverberate past just empty homes. Vacant properties can have a negative impact on the community well-being. Residents may find themselves grappling with lower quality of life.
Among the plethora of metrics that shine light on the housing market’s pulse, builder permit counts are an excellent gauge of healthiness. The significant decline from 2,954 permits in 2018 to 1,650 in 2019 paints a strong picture — one that is highly indicative of the profound effects of COVID. Supply chains struggled and building product companies grappled with tight constraints which ultimately hindered the flow of new projects. The tightening grip on deal flow underscored the deep reality; builders faced new hurdles in securing permits. New permits and new construction serve as a pillar for economic activity, job creation, and a vast array of other things. This 44% year-over-year represented a bottleneck which throttled progress and heightened the problem of housing shortage.
Boulder County also saw a plummet in net migration — the number of households moving into the county less the number moving out. Specifically, it dropped from 1,893 in 2018 to a mere 245 in 2019. This drastic change coupled with the rise in vacancy and the drop in permits can heavily upset the fragile balance of supply and demand. With fewer households relocating to the county and construction activity diminishing, economic growth and community development is stifled.
Amidst the hectic fluctuations in vacancy rates, building permits, and net migration — household size remained remarkably unchanged. Spanning from 2017 to 2020, the average household size in Boulder County held steady at 2.38. While one might expect shifts in household size as a response to events such as a pandemic, Boulder County showed stability in this area.
Conclusion
In conclusion, this analysis of demographic shifts and housing market effects has shown insights into the changes effecting the nation and our town of Boulder. From shifts in population growth and income distribution to fluctuations in vacancy rates and building permits, the relationships between demographic trends and housing market metrics reveal a complex web that works to shape the foundation of our communities. As the nation and places like Boulder work to navigate this new post-pandemic world, understanding these dynamics becomes increasingly crucial for policymakers, urban planners, and stakeholders alike. By recognizing and understanding the evolving needs and preferences of residents and aligning housing policies and investments accordingly, we can strive to create more resilient, equitable, and vibrant communities.
