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articles about “Demographics

More Millennials Leave Parental Nest, Without Lifting Housing Market

Although slightly fewer young adults are living in their parents’ homes, don’t get too excited. Fewer are heading their own households, and the true young adult homeownership rate slipped in 2014.

Jed Kolko, Chief Economist
September 16, 2014

This morning, the Census Bureau released 2014 data that show whether Americans own, rent, or live under someone else’s roof. (See note.) As we’ve pointed out before, the published homeownership rate is often a misleading guide to what’s really happening in the housing market. For instance, suppose young people move out of their parents’ homes into rental apartments. That would lower the published homeownership rate because the number of renters has increased – even though the number of young homeowners is unchanged.

Using these fresh 2014 data, we update several key measures of housing and living arrangements, including:

  1. the percentage of young people living with their parents;
  2. the headship rate, which is the percentage of adults who head a household, either as an owner or a renter;
  3. our “true” homeownership rate, which equals the percentage of adults who are homeowners.

These three measures are closely related. If young people move out of their parents’ homes and become either renters or homeowners, the share of young adults living with parents goes down, while the headship rate for young adults goes up. Furthermore, the true homeownership rate equals the published homeownership rate times the headship rate – and therefore takes into account whether people are dropping out of or entering the housing market. Thus, it gives a clearer picture of whether the housing market is recovering. With that overview, here’s what the new 2014 data show.

True Young-Adult Homeownership Rate Falls in 2014, Reversing 2013 Increase
Let’s start with those millennials in the basement. They’re still there, but, ever so slowly, more are moving out. In 2014, 31.1% of 18-34 year-olds lived with their parents, down slightly from 31.2% in 2013 and from the peak of 31.6% in 2012.

1834LivingWithParents … continue reading

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The Recession’s Lost Generation of Homeowners Isn’t Millennials – It’s the Middle-Aged

Though the published homeownership rate for young adults is still falling, true homeownership among young adults started rising in 2013. Adjusted for longer-term demographic shifts, young-adult homeownership is now at pre-bubble levels, but middle-aged homeownership is lagging.

The latest Census data shows homeownership is still falling for young adults, and the National Association of Realtors (NAR) reports that the share of first-time home-buyers is slipping. While the housing market is clearly improving, with four of the five key indicators of the housing recovery from our Housing Barometer at least halfway back to normal, it looks like the recovery is happening even without much improvement in first-time homeownership. Does that mean the housing recovery isn’t for real?

Not so fast. The official homeownership rate published by the Census gives a misleading picture of homeownership trends. In fact, homeownership among young adults is both on the rise and not too far off from where demographics say it should be. To see this, we did two things in this analysis: (1) account for changes in household formation to get a true measure of homeownership, and (2) adjust for longer-term demographic shifts to compare homeownership levels today with pre-bubble levels.

The answer: our “true” homeownership rate disagrees with the published homeownership rate, and shows that homeownership among young adults increased between 2012 and 2013 after hitting bottom in 2012. However, once we adjust for the huge demographic shifts among young adults – far fewer young adults are married or have kids than two or three decades ago – homeownership in 2013 was roughly at late-1990s levels. That means that the demographic shifts among young adults account for the entire decline in homeownership for 18-34 year-olds over the last twenty years. In other words, if the pre-bubble years of the late 1990s can be considered relatively normal, than today’s lower homeownership rate for young adults might be the new normal, thanks to demographic changes.

But that doesn’t mean all’s well. There may be longer-term damage to homeownership from the recession – but to the middle-aged, not millennials. Homeownership among 35-54 year-olds is lower today than before the housing bubble, even after accounting for demographic shifts. Here’s why.

Young Adult Homeownership Actually On the Rise
The published homeownership rate equals the share of households that own their home instead of rent. It does not, however, capture changes in whether people are dropping out of the housing market to live under someone else’s roof, like those millennials in their parents’ basement, who – in case you missed it – are for real. But if, say, people move out of their parents’ homes and into their own rental apartments, the published homeownership rate would still be falling even if the share of young adults who own remains the same.

Instead, we looked at the true homeownership rate, which equals the number of owner-occupied households divided by the number of all adults; in contrast, the published homeownership rate equals the number of owner-occupied households divided by the number of all households. Of course, the true homeownership rate is always going to be much lower – by half or more – than the published homeownership rate because there are roughly twice as many adults as there are households. The key point, though, is that the published and true homeownership rates can move in different directions if the number of adults per household is changing. That is, in fact, what happened during the recession and recovery (see note #1).

During the recession, as more young people moved in with their parents and fewer headed their own households, published homeownership rate fell from 44.1% in 2005 to 36.8% in 2012 – the 7-point decline was a 17% drop in homeownership. (What we’re calling “published” numbers actually differ slightly from the quarterly and annual homeownership estimates by age group published by the Census – see note #2.) However, the published rate understated the decline: the true homeownership rate for young adults fell from 17.2% in 2005 to 13.5% in 2012 – a drop of 22%.

Then, during the recovery, more young people started to form their own households, primarily as renters. The additional renters pushed the published homeownership rate for 18-34 year-olds down further in 2013 to its lowest level since our analysis begins in 1983:

PublishedHomeownership1834

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Basement-Dwelling Millennials Are For Real

Although a key Census survey counts students in dorms as living with parents, increased college enrollment and dormitory living do not account for the increase in millennials living under their parents’ roofs. Alternative analyses confirm that in the recession millennials have been much more likely to live with their parents than in the past.

The share of millennials – that is, 18-34 year-olds – living with their parents reached a many-decade high during the recession. Last week, an article suggested that these statistics are “criminally misleading” in overstating the increase in millennials actually living with parents because (1) they count dorm-dwelling college students as living with their parents and (2) college enrollment among young people has risen significantly.

Both these points are true: the Current Population Survey’s (CPS) Annual Social and Economic Supplement (ASEC) counts college students who are living in dorms as living with their parents, and college enrollment has indeed gone up. But it does not follow that basement-dwelling millennials are a myth. The ASEC and other Census data show that after adjusting for college enrollment and for dormitory living, millennials were more likely to live with parents in 2012 and 2013 than at any other time for which a consistent data series is available (1986 or 1990, depending on the data source).

Revisiting the ASEC Data
The ASEC counts college students who are living in dorms as living with their parents, so it’s impossible to separate out the dorm-dwellers who were reported as living with parents from college students actually living with their parents full-time. But the survey also reports whether 18-24 year-olds are enrolled in college (in survey years 1986 onward). As a first step, we can exclude all full-time college students from the analysis to make sure we’re not including any dorm-dwellers. Excluding full-time college students, the share of millennials living with parents is still far higher during the recession than at any other time since 1986.

Shareof1824LivingWithParents

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Millennials Are Suburbanizing, While Big Cities Are Having a Baby Boom

Between 2012 and 2013, population growth for 20-34 year-olds was highest in Colorado Springs and San Antonio, while Austin and Raleigh were tops for 50-69 year-olds. But New York, Washington D.C., and Boston all had among the highest growth for 0-4 year-olds.

This morning the Census released its 2013 population estimates by age group for counties, which reveals which local areas are gaining or losing millennials, boomers, and other age groups. Earlier this year, the Census released 2013 population estimates for the overall population – not broken out by age group: at that time we pointed out that the most urban counties had slower population growth than the more suburban counties, even though the most urban counties were growing faster than they did during the housing bubble. (This post and this article explored the broad urban versus suburban trends.)

Today’s new data tell us whether key demographic groups – like millennials (20-34 year olds), boomers (50-69 year olds), and young kids (0-4 year-olds) – might be bucking the broader trend of more suburban counties growing faster than the most urban counties. To measure this, we use the same approach of dividing all U.S. counties into four quartiles based on their household density so that each quartile includes around one-fourth of the total population (see note on county definitions and age groups). Going from the highest to lowest density, the four categories correspond roughly to (1) big, dense cities; (2) big-city suburbs and lower-density cities; (3) lower-density suburbs and small cities; and (4) smaller towns and rural areas.

The punchline: millennial population growth in 2012-2013 in big, dense cities was outpaced by big-city suburbs and lower-density cities and even by lower-density suburbs and smaller cities. Boomer growth in big, dense cities also fell just short of growth in the big-city suburbs and lower-density cities. But the population of kids under the age of 5 grew fastest in big, dense cities. Let’s take a look at each of the age groups.

Millennials Not Flocking to Big Cities
From 2012 to 2013, population growth for millennials (20-34 year-olds) was highest outside big cities. The fastest growth was in the second quartile of counties ranked by density (big-city suburbs and lower-density cities). Furthermore, the third quartile (lower-density suburbs and smaller cities) edged out the top quartile (big, dense cities) for millennial population growth:

MillennialsPopGrowth

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Baby-Boomer Downsizing? Perhaps Not So Fast

While the share of 50-to-69 years-olds living in multi-unit buildings rose slightly in 2012 and 2013, the long-term trend among older households shows downsizing getting rarer and happening later in life.

Throughout the recession and recovery, Millennials have hogged the attention: they suffered a particularly bad recession, which delayed their launch into the housing market, slowed overall household formation, and lowered first-time homeownership. But they’re hardly the only demographic that matters for housing. Baby Boomers will help determine the demand for different types of housing and the supply of homes for sale when – and if – they downsize.

This morning, Fannie Mae released a note on boomer downsizing, showing that the share of baby boomers in single-family detached homes has been roughly stable from 2006-2012 (rising slightly on a per-capita basis and falling slightly in the most recent years on a per-household basis). The big question is what happens longer term: are we about to hit a wave of baby boomers selling their single-family homes and moving into apartments and condos? It’s unlikely, for two reasons: baby boomers are still years away from the age of downsizing, and the long-term trend shows that older households today are less likely to downsize than older adults in the past.

Let’s start by looking at the age when older households move from single-family homes to multi-unit buildings. Based on the 2013 Current Population Survey’s Annual Social and Economic Supplement (CPS ASEC) – the most recent detailed demographic data available – baby boomers (born between 1946 and 1964, which means 50-68 years old in 2014) are less likely than almost any other age group to live in multi-unit buildings as opposed to single-family homes. The only age group less likely to live in multi-unit buildings is 70-74 year-olds, which is the age group that baby boomers will start to enter in the coming years.

HouseholdsLivingMultiUnitBuildings

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