Econintersect: Over the six years from the peak of the housing bubble (2006) through 2011 the make-up of the housing market changed. Renter occupied households increased, owner occupied households decreased and the number of households increased far less than the rate of population growth. Real estate market expert, Robert Dietz, economist with the National Association of Home Builders (NAHB), calls the failure of household growth to keep up with population growth a case of “missing households”.
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Deitz provides the following graph to illustrate the changes in the residential housing market 2006-2011.
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It is clear that home ownership has declined very slightly from 2006 to 2011. Renting has significantly increased. But no data was shown about the number of households. To look at that further data is needed from the U.S. Census Bureau, which Econintersect has obtained from the Current Population Survey/Housing Vacancy Survey, Series H-111. Relevant data is shown in the following table, with population estimates also from the Census Bureau.
The above data was used to construct the following graph.
Where are the missing households? Normalized for population growth the number of households is the same as twelve years ago.
What is missing? Home owners. The distribution of households has shifted significantly to renting. The referenced articles are looking for a phantom that does not appear to have any potential for making an appearance.
What are the prospects for the shift from increased renting toward the historical level of owner occupied units? Not very good in the next year or two, and possibly longer. The reasons:
- The failure of income for middle and lower income groups to grow is reducing the cohort of potential home buyers. See here.
- The increased level of student debt is reducing the ability of younger buyers to afford to buy a house. Student debt has grown four-fold over the past 8 years to total about $1 trillion.
- The wealth of the lower 93% of the population has declined from 2009 to 2011 during the recovery from the Great Recession. See here.
- The percentage of working households that cannot afford housing rents has increased from 22.8% to 26.4% between 2008 and 2012. See here.
- More than 4 million households that have gone through foreclosure in the past several years and millions more that are expected to still go through that process will result in a significant number of households with credit impairment limiting ability to get a new mortgage. See here, here and here.
There are many more problems that will slow the housing market recovery. The mythical missing households is not one of them.
Sources:
- What Happens to the Housing Market When the Investors Leave? (Robert Dietz, U.S. News & World Report, 03 May 2013)
- Will ‘Missing Households’ Reappear After Investors Leave? (Realtor Mag, 07 May 2013)
- American Housing Survey (AHS) (U.S. Census Bureau)
- March 2013 Real Personal Expenditures Rise Weakly But Above Expectations (Steven Hansen, GEI Analysis, 29 April 2013)
- Student Debt Bubble (GEI News, 27 March 2013)
- Pew: Wealth Declines for 93% of Households (GEI News, 07 May 2013)
- Study: Increasingly U.S. Households Can’t Afford to Buy or Rent Housing (GEI News, 05 May 2013)
- Housing Smoke And Mirrors (Adam Whitehead, GEI Analysis, 26 February 2013)
- Housing Smoke and Mirrors, Part 2 (Adam Whitehead, GEI Analysis, 19 March 2013)
- Latest U.S. Housing Smoke and Mirrors (Adam Whitehead, GEI Analysis, 21 April 2013)
