Household formation, which stagnated when recession kept many young
Americans from leaving their parents’ home or forced others to return to
them, is finally on the rise.
The number of households increased 1.1 million in 2011 and nearly 1.2
million last year, underpinned by gradual labor market gains and steady
economic improvement.
RBS analyst Guy Berger remarks, “The rise in household formation bodes
well for the housing recovery. Instead of having too many houses, we are
turning to a situation where there aren’t enough.”
The gains are felt the most in the rental market, where rising demand
has triggered a spike in new apartment construction. Increased building
activity, in turn, has also stimulated such related areas as furniture
sales. By comparison, the U.S. homeownership rate has not risen much
from a 15-year low reached in the first quarter of last year.
“We are going to see more recovery in the rental market in the very
short run,” says Gary Painter, a public policy professor at the
University of Southern California. “As the market improves, people will
start to face higher rents and over time, that will spill over into the
owner-occupied market.”
A monthly National Association of Home Builders survey shows that
growing demand and tightening supply have pushed homebuilder sentiment
to a near seven-year high. NAHB Chairman Barry Rutenberg, a homebuilder
from Gainesville, Fla., says that more residential developers appear
undaunted by the possibility that banks could dump an increasing number
of foreclosed homes onto the market as conditions improve. He estimates
that approximately 916,000 new residential projects would break ground
in 2013 versus around 780,000 last year.
Source: “Analysis: More Americans Leave Parental Nest in Boost for Housing” Reuters (01/18/13)
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