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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: CalculatedRisk who wrote (80049)6/25/2007 10:40:20 AM
From: MulhollandDriveRead Replies (2) of 306849
 
CR...

what do you make of the household formation being down 70%?

paa2005.princeton.edu

Extended Abstract
The 1990s saw a concerted increase in homeownership rates in most U.S.
metropolitan areas, reversing the decade of stagnation observed in the 1980s (Myers
et al. 1992; PD&R 2001; Simmons 2001b). While homeownership rates of the elderly
have increased in every state during the 1990s, minorities and young adults struggled
to keep up with the rising tide (Simmons 2001a).
The increases in overall homeownership rates have been widely touted as a
positive sign of housing well-being in America. However, there are two sides to the
story of rising homeownership. The largely accepted one is that a larger share of
households own their own homes, reflecting growing participation in homeownership
and wealth building during the 1990s.
The flip side of the story is that the homeownership increase may be the result
of shrinking household formation. Renter households are usually the primary victim
of declining household formation. The loss of renters will inadvertently increase
homeownership rates, albeit in a negative way. Said alternatively, the increases in
homeownership do not necessarily mean that there are more homeowners relative to
the population. Facing challenges in the housing market, many people may have
delayed the formation of households. Instead, they may have chosen to live with
parents or some other adults. In certain circumstances, renters are so discouraged that
they may drop out of the housing market entirely

In these two scenarios, both

population growth and owner household growth surpass the growth in the number of
renter households. The increase in homeownership rates would come at the expense
of renters, which does not adhere to the federal policy of expanding housing
opportunities.
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