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Who Is Actually Forming New Households?

Terner Center for Innovative Housing, UC Berkeley: “For several quarters, the Census has reported an increase in household formation. This is the turnaround that the housing market has been waiting years for. During the recession, the number of households grew slowly, as young adults increasingly stayed in their parents’ homes and others doubled up, too, with siblings, adult children, or roommates. Now, the job market has improved, and household formation is on the rise, approaching or exceeding historical averages. As new households form, they fill up vacant homes, pushing up prices and rents. In response, homebuilders build more, which in turn adds to overall economic activity. But there’s a puzzle. Surprisingly, even with an improving job market, the share of young adults living in their parents’ homes continues to rise, as the Census Bureau and the Pew Research Center have reported. The expected driver of household formation – young adults moving out of their parents’ basements – isn’t happening. So who is forming households?…Despite expectations that millennials are the force behind household formation, older adults are driving household formation. Strikingly, age groups younger than 55 collectively had negative household formation between 2014 and 2015, while 65-74 year-olds accounted for more than two thirds (860 thousand) of overall household formation...”

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