A lot of people needed to get out of the house. The economy is in forward motion, there has been a positive turn in U.S. household formation and a rising demand for all types of housing, including multifamily and single-family rentals…but a lot of people who should be forming their own households are not.
Think of a house as one or more people who live in the same home. Before the housing bust, an average of 1.1 million new households were formed each year in the U.S.
Household formation plummeted during the Great Recession, as young adults moved in with their parents and older adults moved in with their children, people took in roommates. From the first quarter of 2008 to 1Q 2011, around 450,000 households formed each year. 2011 went back to the norm of 1.1 million and new household formation swelled to 2.4 million in 2012.but there’s more to come.
Pontificators believe there is still an estimated 2.4 million missing households that should be forming in the near future. For more than two years, housing permits, housing starts, resales and new single-family sales have been on the rise. Only household formation is still lagging.
Job growth is the primary driver for household formation and the steady employment growth of the past three years is another impetus for new household formation. Young adults between 18 and 34 years old are itching to get out on their own and start living their lives.
“You’re just seeing a lot more people getting reengaged,” said Sterne Agee analyst Jay McCanless. “Housing demand, whether its rental or ownership, is a positive indicator.”
Grow up. Go forth. Get on with your life. Good luck.