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Although the housing market is likely to remain weak for some time, pent-up demographic factors will likely spur a return to former rates of growth within the next few years, according to a new study released today.

The United States will likely add another 12.5 million to 15 million households this decade, equaling or exceeding the housing boom years of 1995-2005 and boosting home sales and new construction. That’s according to the new report released this morning by Harvard University’s Joint Center for Housing Studies.

The report predicts that rising employment and continued low interest rates will boost the housing market once a predicted downturn caused by the end of the homebuyer tax credit passes. Even so, the housing market will continue to face substantial challenges, including continuing high rates of unemployment, foreclosures and vacant properties.

“If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,” said Eric Belsky, executive director of the Joint Center for Housing Studies. “Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too.”

The report cautions that even if the housing sales and construction rebound as predicted, there will still be lingering effects from the recession and financial crisis. With nearly one homeowner in seven “under water” on their mortgage, owing more than the property is worth, it’s estimated that nearly 5 million homeowners will need to see prices recover by 25 percent before they are back at positive equity.

It’s also predicted it will take time to work through all the homes in foreclosure. A particular challenge will be finding responsible new owners and occupants for millions of foreclosed properties that will otherwise stand vacant, especially in low-income neighborhoods where subprime mortgages were common.

The study notes that younger adults have been relatively slow to establish independent households in recent years, with many continuing to live with parents or roommates owing to economic pressures. That suggests a pent-up demand for housing that, coupled with current levels of affordability, could trigger increased demand.

It notes that the Echo Boom Generation, boosted by high rates of immigration, is larger than the much-heralded  Baby Boom Generation and that the so-called Baby Bust Generation of 1966-85 is nearly as large. It says population growth should support the construction of an additional 1.7 million to 1.9 million new homes per year this decade.

The report also notes that with the oldest Baby Boomers just now turning 64, demand for retirement housing that supports active lifestyles will likely increase, spurring new construction for that type of property.

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