Study: Household Formations Have Returned to Pre-Recession Levels

Study: Household Formations Have Returned to Pre-Recession Levels
New household formation in the United States has recovered from the widespread job losses that came with the recession, according to a new study from the Lusk Center for Real Estate at the University of Southern California. The study was conducted authored by Gary Painter, director of the Lusk Center, and doctoral candidate Jung Hyun Choi, to determine how long declines in household formation would last following a major economic shock such as a drop in employment that occurred during the recession.

The study found that household formations consistently return to their previous levels in about three years regardless of whether employment has recovered at the same rate during that time.

"This shows us that even a permanent increase in the unemployment rate will not have a permanent impact on housing formation," Painter said. "As a result, policymakers and industry practitioners have a new level of predictability when it comes to how economic crises impact the rate of new households."

The researchers found in their study that household formations in the U.S. fell to almost zero during the recession's peak years of 2008 to 2010, but then played three years of catch-up and have now recovered to pre-recession levels of about one million per year. Quarterly data from 1975 to 2011 showed that household recoveries typically lasted three years following periods of unemployment.

"The freeze in formations is over and people are again moving out and forming households. This means that real estate professionals and policy makers should not keep waiting for pent-up demand," Painter said. "So while a number of factors will continue to influence the housing recovery, household formation is no longer one of them."

Top News