More Household Formation to Buoy Demand

July 16, 2013

As job growth remains steady, conditions are ripening for household formations to grow stronger, according to a recent report on housing demand. Children are moving out of their parents’ homes, and college graduates are stepping out on their own, helping to fuel demand for housing. 

The growth in household formation has caused an increase in demand over the last two years for all types of housing, including multifamily and single-family ownership and rentals, according to the report. 

Household formation hit bottom in 2009 and 2010, hovering in the mid-to-high 300,000 range. The normal average is about 1.2 million. In 2011, annual household growth rose to 1.1 million, and 2.4 million in 2012. 

Analysts note in the report that they expect household formation to continue to rise, assuming that job growth remains at or above the current pace.

Jay McCanless, a Sterne Agee analyst, expects housing starts to remain strong through at least 2015. 

Source: “Conditions are ripe for household formation,” HousingWire (July 15, 2013)