The future of housing may be in your basement

Who holds the key to the future of the housing market? Look at the hands playing video games in your basement.

According to a new report, the "echo boomers," born between 1981 and 1995, will account for 78% to 80% of sales of owner-occupied homes to people ages 65 and under between now and 2020.

"In the next 10 years, the echo boomers are almost the entire story," said Rolf Pendall, director of the Urban Institute's Metropolitan Housing & Communities Policy Center, at a recent housing conference in San Antonio. Pendall was one of the authors of the report, "Demographic Challenges and Opportunities for U.S. Housing Markets."

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Unfortunately, those echo boomers may be less likely to buy homes than the generations that preceded them, for emotional and financial reasons.

• Young people don't want old garden apartments

Derek Thompson looked at several reasons why young people are less likely to buy homes, in a story in The Atlantic headlined, "The end of ownership: Why aren't young people buying more houses?"

One factor is a decline in marriage. Other reasons are economic. Thompson writes:

In the last three years, mortgage interest rates have fallen tremendously, creating a good opportunity for people with means to get in on a house. But who's got the means and opportunity? Unemployment for twenty-somethings is twice as high as the national average. Banks have tighter credit conditions on all but the highest-quality borrowers.

Student-loan debt is a major reason that young adults can't buy homes.

• It's official: More young adults live with parents

Bob Willis at Bloomberg Businessweek quotes a recent Federal Reserve study that found that only 9% of 29- to 34-year-olds got their first mortgage between 2009 and 2011, down from 17% a decade before.

"Just as the housing bubble created a mortgage debt overhang that absorbs the income of consumers and renders them unable to engage in consumer spending that sustains the economy, so too are student loans beginning to have the same effect, which will be a drag on the economy for the foreseeable future," said John Rao, vice president of the National Association of Consumer Bankruptcy Attorneys, in the Businessweek article.

• Gen Y doesn't want soaker tubs and cookie-cutter suburbs

While younger people are buying fewer houses, baby boomers will be selling more homes, creating more supply at a time of less demand. The demographic report explains it this way:

Among adults entering their 60s, the pace of household dissolution begins to exceed that of household creation, meaning that this cohort releases more housing units into the supply than it absorbs. Just as the baby boom will swell the number of seniors in the next two decades, it will also swell the number of dwellings released into the housing market over the next four decades, creating new challenges and opportunities for housing policy. The increase is likely to be felt most acutely in the housing markets of the Northeast and Midwest, where the number of older homeowners seeking to sell their homes already accounts for a large share of the houses bought by younger homebuyers.

The state of the overall economy will make a big difference in how echo boomers approach homebuying, the report says:

Regardless of the economy and policy, echo boomers will account for between 75 and 80 percent of the owner-occupied housing absorbed by people under 65 before 2020. A strong recovery with favorable housing-market conditions would translate to substantial growth in echo boomer households. Resulting demand would help absorb houses that are currently vacant or being withheld from the market, and would accelerate a return to conditions that are conducive for residential construction. A weak economy and job market, by contrast, would substantially depress household formation and homeownership by this important segment of the population.