MBA: An Estimated 1.2 Million Households Were Lost During Recession
|April 15, 2010|
1.2 million households were lost from 2005 to 2008, despite the population increase of 3.4 million in the study area, as Americans experienced one of the deepest recessions in decades, according to a study released today by the Mortgage Bankers Association (MBA). This decline in households is likely what contributed significantly to the excess supply of apartments and single family homes on the market.
The study entitled, “What Happens to Household Formation in a Recession,” which was conducted by Professor Gary Painter of USC and sponsored by the Research Institute for Housing America (RIHA), analyzes the impact of economic and housing conditions on household formation and how the recent recession has affected Americans’ propensity to form new households, mobility trends, and changes in the rate of overcrowding.
“With such a significant drop in households nationwide, it is clear the most recent recession impacted individuals’ decisions to move out on their own and caused many Americans to join already formed households,” said Painter, associate professor in the School of Policy, Planning and Development at the University of Southern California. “Due to data limitations, my analysis had to focus on household formation as of 2008. Clearly, given the depth of the downturn in 2009, and the ongoing weakness in the job market through the beginning of this year, this study gives no reason to expect that household formation has picked up at all.”
“This study clearly indicates that household formation will only pick up once the job market stabilizes. Young adults need not only a paycheck, but also a sense that they have sustainable employment before striking out on their own,” continued Painter. “Typically, many new households are renters, but if young adults postpone moving out, some may have the ability to save for a downpayment, causing them to skip the rental stage and move right to homeownership.”
“Given the strong tie between unemployment rates and household formation, household formation will likely return to normal levels by 2012 as unemployment rates decline over the next two years. There is no demographic silver bullet that will solve the supply overhang we are seeing in many housing markets around the country. The housing and mortgage industries will feel the impact of this reduction in the number of households for years to come,” Painter continued.
Michael Fratantoni, MBA’s vice president of Research and Economics added, “We hear stories about young adults remaining in or returning to the nest after college and of households doubling up. We wanted to go beyond the anecdotes to provide our members with hard numbers on the trends in household formation that will impact demand for both single-family and multifamily properties.”
The study includes analysis of data from the past 40 years, a period covering 6 recessions, to examine the historical impact of recessions and associated elevated unemployment rates on the formation of new households.
Key findings from the study include: