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When the economy is distressed, as it currently is, young adults often retreat to their parents’ homes – leaving empty apartments behind them. They’re “boomerang renters” in The Wall Street Journal’s colorful phrasing.
That’s a trend that’s not good news for the home sale market: rising apartment vacancies put downward pressure on rents, reducing the incentives for home buyers to purchase.
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{ 4 comments… read them below or add one }
Perhaps, if we take a little bit longer view of the situation, having a large group of twenty somethings living at home for a year or so will allow them to save up for a down payment and then enter the real estate market as first time buyers in a year or two.
I believe the stat goes: 20yrs ago there were 2.7 people per household… in 2007 there were 1.6 people per household… the demand can continue to go away… for a long time. and as prices keep on slipping and rents keep coming down, there’s no incentive to buy…
js,
I have no idea if the stats you point out actually affect housing demand. But, I look at that number of 1.6 people in households-combined with a growing U.S. population-and think there was a reflection of MORE demand for individual housing in 2007 as less people were packing into one aprtament, house etc…
If more people move “back home” now, number of people per household should go UP (which would decrease demand for extra housing units). Maybe this is what you meant.
Then you have my wife and I adding number of persons in our household at an alarming rate, creating demand for another home.
js,
Double-check your source. There’s no way that average household size is now 1.6, either locally or natonally.
Common sense alone tells you that – a change of that magnitude would have required a 69% increase in the number of occupied housing units, even if there had been no population increase.
In 2000, for example, the City of Chicago had a population of 2,896,016, and 1,061,928 households for an average household size of 2.7. A reduction in the household size to 1.6 translates to an increase of about 730,000 housing units assuming no population change.