The changing needs of both millennials and baby boomers are going to drive the housing market through the roof in the next 10 years.

On one end of the aging spectrum, millennials who are moving into their late 20s and 30s, will demand rental housing and starter homes, noted the Joint Center for Housing Studies of Harvard University in its study, "The State of the Nation’s Housing 2017." On the opposite side of the aging spectrum, baby boomers will be looking for retirement homes and smaller single-family homes as they downsize.

“Meeting this growing and diverse demand will require concerted efforts by the public, private, and nonprofit sectors to expand the range of housing options available,” said Daniel McCue, a senior research associate at the center.

The report released Friday says the housing market by most measures is returning to normal since the Great Recession. Demand, prices and construction volumes are all on the rise. The number of homeowners paying more than 30 percent of their income for housing costs is coming down because of increased wages. But the tight housing supply means there are still 19 million people payng more than half of theiir income on housing. 

The tight supply is going to drive home prices even higher, according to Chris Herbert, the center’s managing director. Fewer homes were built in the last decade than in any other decade since 1970. Although some home construction has rebounded, few small single-family homes have been built.

A strong surge in the building of modest homes is going to be needed, as well as a loosening of restrictions on mortgages, which are primarily limited right now to those with pristine credit, the report says.

At the same time, rental vacancies hit a 30-year low last year and rent increases outpaced the inflation rate. The housing situation is being exacerbated by the continued construction of high end homes and the loss of homes on the low end.

“There is a growing mismatch between the rental stock and growing demand from low and moderate income households,” the report said.