Is Household Formation Coming? And What Does it Look Like?

Housing
January 14, 2014 2:11 pm

Here is an interesting paper just issued by the Kansas City Federal Reserve regarding the state of household formation in the United States, one of the largest drivers and predictors of future housing growth.  The paper suggests that the robust growth that occurred in the 1990s and 2000s tailed off as population growth slowed in this country due to less migration and fewer births.  But even with a reset baseline based on new Census Bureau information, there is still a large gap between what household formation should have been and what the United States is actually experiencing.

The article concludes that household formation should begin ramping up in 2014 in the multi-family sector and a moderate return in 2015 for single family houses.  The paper also argues that the long-term trend suggests declining (albeit still the majority of household formation) numbers for single family and increasing numbers for multi-family products.  This would be consistent with demographic trends occurring throughout the country of a return to the core of metropolitan areas and moves away from suburbs.

This is a very interesting article and I thank Dan Wisner at Osprey Homes for keying me into it.

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