flexiblefullpage - default
Currently Reading

Is The Homeownership Rate Among Young People About To Explode?

Advertisement
billboard - default

Is The Homeownership Rate Among Young People About To Explode?

As young people, specifically Millennials, age into their thirties, the pace of household formation is ready to take off


May 24, 2016

Times have changed, and it is no longer as common to see young people setting up their own household and purchasing a home. As MarketWatch reports, for 50 years before the housing crisis and the recession, the pace of the number of new households created on an annual basis exceeded population growth by an average of about 0.2 percentage points each year. Since 2007, however, that number has dropped drastically to -0.5 percentage points per year.

It isn’t exactly a welcome sight, especially considering the need for new household formation to maintain a healthy housing market. But it might not all be as doom and gloom as it seems. In a new paper from the San Francisco Fed titled “Household Formation Among Young Adults," economist Fred Furlong writes that young people do not appear to be missing out on homeownership completely, they are merely delayed.

Over a five-year period from March 2011 to March 2016 two cohorts of people were tracked. In 2011, the cohort aged 30-34 had a headship rate of 51 percent, while those in the younger cohort comprised of individuals aged 25 to 29 had a rate of 45 percent. In March 2016, the younger group had reached the same headship rate as the 30 to 34 cohort from five years prior. So, while it may be delayed, the same numbers are being reached.

What this means is that, thanks to population growth, the economy should be on the precipice of a household formation boom. In the paper, Furlong projects household formation to average about 1.4 million to 1.5 million per year through 2020. For the past five years household formation has sat right around 900,000 per year.

However, even with the possibility of more household formation, many analysts believe the homeownership rate is likely to remain right around the 63.5 percent it was in the first quarter of 2016, due in large part to an increasing number of people who are making the decision to rent instead of buy.

Regardless, whether people buy or continue to rent, more housing is going to be needed to accommodate all of the newly formed households, which means even more construction is going to be necessary to prevent an even more acute shortage of housing stock.

Read more

Advertisement
leaderboard2 - default

Tags

Related Stories

Construction

Proven Ways to Improve Jobsite Productivity

Consider these solutions for reducing cycle time, hard costs, dry runs, rework, miscommunication, and overall inefficiencies on the jobsite

Affordability

What Are Our Affordable Housing Options? Really

There are a range of ideas out there for addressing the housing affordability crisis. And while offering more housing choices is great, which of those are truly solutions to affordability?

Business Management

Happiness and 'The Bear'

Can happiness be the core strategy of a home building business? It can ... and it probably should be

Advertisement
boombox1 -
Advertisement
native1 - default
halfpage2 -

More in Category

Delaware-based Schell Brothers, our 2023 Builder of the Year, brings a refreshing approach to delivering homes and measuring success with an overriding mission of happiness

NAHB Chairman's Message: In a challenging business environment for home builders, and with higher housing costs for families, the National Association of Home Builders is working to help home builders better meet the nation's housing needs

Sure there are challenges, but overall, Pro Builder's annual Housing Forecast Survey finds home builders are optimistic about the coming year

Advertisement
native2 - default
Advertisement
halfpage1 -

Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.


Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Subscribe
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.