1.2 Million Fewer Households, More Overcrowding

During the initial years of the housing downturn, optimists sometimes offered the following argument: “Everyone has to live somewhere. If a family loses their home to foreclosure, they will become renters. Their new residence might be smaller and less desirable than their former home, but from the perspective of housing units it’s a wash: their former home becomes vacant, but a previously empty rental becomes occupied. That should limit downward pressure on housing overall.”

That argument contains an element of truth: many foreclosed homeowners do indeed become renters (some even become homeowners again). But I’ve always wondered how many former homeowners follow a different path and instead move in with their parents, friends, or roommates, rather than getting their own place to live. Similarly, I’ve wondered how many young adults have delayed starting their own households and instead have stayed at home longer.

On Wednesday, the Mortgage Bankers Association released a study by Gary Painter (sponsored by the Research Institute for Housing America) that examines this question. His answer? America lost 1.2 million households from 2005 to 2008, despite ongoing population increases. Oh, and we likely lost even more households in 2009.

Needless to say, that retrenchment contributes to the ongoing overhang of vacant homes and rental properties.

As one piece of evidence about changes in household formation, Painter looked at the fraction of households that were overcrowded, which is defined as having more people than rooms. He found that overcrowding rates increased sharply from 2005 to 2008 (the most recent year for which he had data):

P.S. A related issue is the extent to which people have become homeless, rather than moving in with others. I didn’t find a clear answer in some quick searches, but the National Coalition for the Homeless has a useful discussion.

6 thoughts on “1.2 Million Fewer Households, More Overcrowding”

  1. Is it too much of a leap to think that if the housing market was allowed to self-adjust (I.e. prudent vs feel good lending practices, foreclosure is okay, etc) some if this overcrowding would translate into demand for more housing?

  2. I’d trust Painter’s analysis more if he knew that a change from 2.2% to 9.8% is a change of 345%, not 7.2%.

  3. its a bit of a stretch to say americans, with the most sq ft per capita anywhere in the world, are in any way “overcrowded”..

  4. RJP- That’s largely semantic, yes it’s a 345% increase in the number of people living in conditions defined as ‘overcrowded’, but it’s a 7.2% increase in the percent of the total population meeting that definition. Numerators matter.

    rjs- I agree that the definition of ‘overcrowded’ does not stand up to international comparisons. But don’t be fooled by central tendencies, just because the average household uses a great deal of space doesn’t mean others aren’t living in tight conditions.

  5. Glad to see the recession is over as predicted and green shoots are sprouting left and right. This shrinking households is probably a good thing, because these people are saving rent/house payments and using it to invest in the stock market, right?

    Will commercial real estate be able to pull off this same feat, can Blockbuster move in with Walmart? Can Walgreens move in with Target? Can GM move in with Ford?

    It seems to me this is just more proof that the recession/depression is rolling onward despite every effort by the government to mask it by planting stories in the media, and committing outright fraud by propping up the largest 18 banks with quarterly loans through the Federal Reserve to make their reserve ratios look good. The only employment hiring is by the Government for the Census. This is not indicative of a healthy and recovering economy. Quite the contrary, this points to a double dip recession lasting for several more years.

  6. jane, here’s another green shoot for you: consumer spending!

    Consumer Spending Has Held Up Because People Aren’t Paying Their Mortgages – I’ve been somewhat perplexed by how well consumer spending has held up, at least on a relative basis, given that 1) “underemployment” is above 20 percent and the number of long-term employed is at a record; 2) income has not kept pace with consumption; and, 3) the housing industry is nowhere near a recovery (and the foreclosures just keep on coming). No doubt the government has played an important role in underpinning demand, especially through its emergency unemployment benefits programs and certain other stimulus efforts. But that didn’t seem to explain matters fully. Then I read the following post, “How Obama’s ‘Extend & Pretend’ Mortgage Policy Explains The Apparent Disconnect Between Housing And The Consumer,” (citing the excellent HousingWire blog) and, suddenly, it all made sense. The reason why no small number of Americans can afford to keep on spending is because they’ve got one less (big) bill to pay…

    http://seekingalpha.com/article/197632-consumer-spending-has-held-up-because-people-aren-t-paying-their-mortgages

Comments are closed.