Household formation lags, could impede a 'sustained recovery'

The rate of household formation is dropping, a trend that might hamper a “sustained recovery,” according to an analysis from the Harvard Joint Center for Housing Studies using U.S. Census data. Estimates for household formation in 2012 were revised downward 12.5 percent to 857,000, and the trend through the second quarter of 2013 suggests that households are forming at an even lower rate of 746,000 per year.

Census data also shows that the homeownership rate hasn’t reversed its recent slide. At 65 percent, the homeownership rate during the second quarter was unchanged from the first quarter but down 0.5 percent from a year ago.

“These trends suggest that recent gains in home prices and single-family home construction have been driven more by a restricted supply of homes for sale amid demand from existing owners rather than by growth in first-time homebuyers adding to the number of owners,” the Center noted in its analysis.

Source: Harvard Joint Center for Housing Studies