During the Great Recession, household formation in the U.S. was well below historic levels, dimming the demand for new homes. Although many sectors of the economy have experienced sustained recoveries, household growth still lags.
"While other measures of the housing recovery are chugging along – like foreclosures, prices, sales, and construction – household formation is lagging," reports Jed Kolko. "Thanks to years of below-normal household formation, the number of 'missing households' has accumulated."
"The majority of the missing households are young people who aren’t heading up their own households," he explains. "Instead, they’re living with their parents: the share of 18-34 year-olds living with their parents rose from around 27% before the crash to above 31%, where it remains in 2013."
"What will it take for household formation to bounce back? Jobs will help, but the job recovery for young people still has a long way to go. While more young adults are working now than a year ago, their employment rate is still much closer to the worst of the recession than to pre-recession levels."
"It could still take years before young people have built up the savings and economic security to leave the nest," Kolko concludes.
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