Tag Archives: Household

JCHS Releases New Household Projections

by Dan McCue

Research Manager
Today, the Joint Center for Housing Studies posted its latest household projections. These new projections incorporate several updates to data that were made since our last projections in 2010. The 2013 projections use the Census Bureau 2012 Population Projections (released in late 2012 and early 2013), and also use more recent data to derive headship rates (ratios of households per person), specifically using data from the 2011-2013 Current Population Estimates and Current Population Survey March Supplements.
Aside from the new data, the JCHS projection methodology remains largely unchanged from that used to create the 2010 series. The most notable change is that unlike in 2010 we do not make any adjustment to the Census Bureau’s population projections, as our concerns about what seemed to be overly high estimates of future immigration levels have now been addressed in the latest projections from Census. Since we are using the 2012 Census population projections as published, the 2013 JCHS household projections now contain high, middle, and low series, whereas the 2010 projections only had a high and a low series. The projections are also carried out an additional ten years, and so now extend to 2035.
The 2013 JCHS household projections are consistent with those from 2010.  In the near term (2015-2025), they call for annual household growth rates ranging from 1.16 million in the low series to 1.32 million in the high series, not far from the span of 1.15–1.36 million per year in our 2010 projections.  Differences between the 2013 and 2010 series largely follow differences in the underlying population projections (Figure 1).  Some difference is also due to updated headship rates, which are calculated for every 5-year age group by race and averaged across the years 2011, 2012, and 2013.  These are now slightly lower overall than those from 2007, 2008, and 2009 used in the 2010 projections (Figure 2).  (Click to enlarge.)

032714_mccue_figure1_sm
Sources: 2008 and 2012 Census Bureau Population Projections and 2010 JCHS Household Projections.
Note: Adult headship rates use CPS/ASEC household counts and Census July 1 Estimates of the population age 15 and older.  Source: JCHS tabulations of Census Bureau data.032714_mccue_figure2_sm
Like the 2010 projections, our 2013 household projections also anticipate substantial growth in minority, senior, and single-person households in the coming decades (Figure 3).  In the 2015-2025 period for instance, minorities are projected to account for just over 76 percent of all household growth in each of the low-, middle-, and high- projections, with Hispanics alone accounting for 40 percent of total household growth. Additionally, growth in the number of households age 65 or older during this period is also expected to be 91 percent of the net change in households under the low projection and 81 percent in the high projection. As a result of the growth in senior households, single-person (4.4-4.7 million) and married-without-children households (4.0-4.3 million), two of the largest groups that comprise senior households, will together comprise nearly three quarters of all household growth in 2015-2025, but the number of married with children households will also see some growth as millennials age.
032714_mccue_figure3_sm

Source: 2013 JCHS Household Projections.

Tenure Scenarios Presented as Well
The report also includes a simple homeowner and renter projection scenario.  Under a steady-state scenario of constant homeownership rates by age, race, and household type, this analysis offers one look at how demographic changes in the composition of households may influence future homeownership rates. In this scenario, changing demographics are expected to be a positive influence on the overall homeownership rate through about 2025 (Figure 4).  After that time, the upward influence of the aging of the population gives way to greater downward pressure from young adult and minority household growth.  Figure 4 shows how downward pressure on homeownership rates is steepest in the high projections which, unlike the middle- and low-projections, expects no demographically driven growth in homeownership rates through 2025.
032714_mccue_figure4_sm
Note: Homeownership rates by age, race/ethnicity, and household-type are held constant. 
Source: Joint Center for Housing Studies tabulations of 2013 JCHS Household Projections.
Users of these estimates are cautioned that that they should be considered baseline projections and not a growth forecast. Actual household growth could deviate dramatically over short periods of time, as the projections reflect long-run, demographically driven trends and do not allow for any adjustments either upward or downward in response to changing economic conditions or cyclical factors.  Indeed, favorable economic conditions could increase headship rates above levels assumed in the projection and increase household growth, while a variety of factors could weigh down economic opportunities and result in lower household formation rates that depress future household growth.  

1 Comment

Filed under JCHS

JCHS: A Housing Recovery, but Not for All Americans

A Housing Recovery, but Not for All Americans

by Eric Belsky
Managing Director

Driven by rising home prices and growing demand, the U.S. housing recovery is well underway, according to our latest State of the Nation’s Housing report released today. While still at historically low levels, housing construction has finally turned the corner, giving the economy a much-needed boost. But even as the recovery gains momentum, millions of homeowners are still delinquent on their mortgages or owe more than their homes are worth, and severe housing cost burdens have set a new record.

Driven by an increase of 1.1 million renter households, last year marked the second consecutive year of double digit percentage increases in multifamily construction. But the flip side of the strong rental market was the continued slide in homeownership rates. Even as historically low interest rates have helped make the monthly cost of owning a home more favorable than any time in the past 40 years, the national homeownership rate fell for the eighth straight year in 2012. The drop was especially pronounced for 25–54 year olds, whose homeownership rates were at their lowest point since recordkeeping began in 1976.

Note: White and black households are non-Hispanic; Hispanic households can be of any race.
Source: JCHS tabulations of US Census Bureau, Current Population Surveys.

Tight credit is also limiting the ability of would-be homebuyers to take advantage of today’s affordable conditions and likely discouraging many from even trying.  At issue is whether, and at what cost, mortgage financing will be available to borrowers across a broad spectrum of incomes, wealth, and credit histories moving forward.

And while the recovery is good news for many, the number of Americans shelling out half or more of their incomes on housing is at an all-time high. At last count, 20.6 million households were shouldering such severe burdens, including nearly seven out of ten households with annual incomes of less than $15,000 (roughly equivalent to year-round employment at the minimum wage). But, the report notes, even as the need has never been greater, federal budget sequestration will pare down the number of households receiving rental housing assistance.

Notes: Severely cost-burdened households spend more than 50 percent of pre-tax income on housing costs.  Incomes are in constant 2011 dollars, adjusted for inflation by the CPI-U for All Items.
Source: JCHS tabulations of US Census Bureau, American Community Surveys.

With rising home prices helping to revive household balance sheets and expanding residential construction adding to job growth, the housing sector is finally providing a much needed boost to the economy, but long-term vacancies are at elevated levels in a number of places, millions of owners are still struggling to make their mortgage payments, and credit conditions for homebuyers remain extremely tight. It will take time for these problems to subside. Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families, and entire communities, efforts to address these urgent concerns as well as longstanding housing affordability challenges should be among the nation’s highest priorities.

Download the 2013 State of the Nation’s Housing report.

Leave a comment

Filed under JCHS

The Resurrection of Household Growth: The Missing Link in the Housing Recovery

The Resurrection of Household Growth: The Missing Link in the Housing Recovery

by Chris Herbert
Research Director
New survey data released by the Census Bureau last week provides more strong evidence that the nascent housing recovery is being built on a solid foundation.  The latest Housing Vacancy Survey (HVS) (which provides quarterly updates on the number of households as well as vacancy and homeownership rates) indicates that as of the third quarter of this year U.S. households were increasing at a rate of just over 900,000 per year, giving a strong boost to overall housing demand.  This represents a substantial increase from 2011 when the same survey found that the country only added about 635,000 households.  While still well below the rate of 1.18 million per year that the Joint Center estimates the U.S. is likely to average over the 2010-2020 decade, the upturn in 2012 indicates that the moderate but steady pace of economic growth is finally translating into increased demand for housing, which bodes well for a sustained recovery.Much of the attention on housing market woes has focused on the supply side. Certainly, as the housing bubble was bursting at the end of 2006 the excess supply of housing was a significant contributor.  As of that time, the U.S. had added more new homes over the previous 10 year period than at any other point going back to the early 1970s when record keeping for housing completions and mobile home placements began. But after five straight years of housing starts below 1 million units a year—a level last seen in 1945 when World War II was ending—it is hard to argue that the housing market is still suffering the after effects of overbuilding. In fact, by the end of 2011 the total amount of new housing put in place over the previous 10 years was the lowest since record keeping began.

Note: Available data go back to 1974.  Source: JCHS calculations of US Census Bureau data

 

Instead, the lagging recovery in the housing market has been more attributable to anemic growth in the demand for housing as indicated by weak household growth.  According to the HVS, household growth fell sharply in 2007 as the housing bubble collapsed.  (See Figure 2.)  After averaging 1.35 million from 2000 through 2006, over the next 5 years annual household growth barely exceeded 600,000.  Given the trends of the last five years, the spurt in household growth to an annual rate of 900,000 through the first three quarters of this year is notable.  If the upward trend in household growth continues, housing should see a sustained recovery in 2013.

Note: 2012 is an estimate of annual average growth based on trends through the third quarter of 2012. JCHS low projection assumes that immigration in 2010-20 is half that in the US Census Bureau’s 2008 middle-series (preferred) population projection. Sources: US Census Bureau, Housing Vacancy Survey; JCHS 2010 household growth projections

Leave a comment

Filed under JCHS

NAHB Fall Construction Forecast

NAHB Fall Construction Forecast

by David Crowe — Eye on Housing

Sparked by rising home prices across much of the nation, the housing recovery is now under way, but fiscal uncertainties and other challenges could result in a bumpy ride in the coming months, according to economists participating in yesterday’s National Association of Home Builders (NAHB) webinar on the construction and economic outlook.

“We’re seeing a more robust housing sector than many other parts of the economy,” said NAHB Chief Economist David Crowe. “One of the reasons is we have finally begun to see on a national scale that house prices are picking up again.”

Crowe cited a number of other factors that are carrying the housing momentum forward. These include:

·     Pent-up household formations

·     Rising consumer confidence

·     Increasing builder confidence in all three legs of the industry: remodeling, multifamily and single-family construction

·     Growing rental demand

·     More than 100 metros currently on the NAHB/First American Improving Markets Index

However, Crowe offered several cautionary factors that continue to put a drag on housing activity at this time – including builders who are experiencing difficulties in obtaining production credit, qualified buyers who are unable to obtain mortgage loans, inaccurate appraisals, seriously delinquent mortgages that are at least 90 days late or in foreclosure, and a limited inventory of developed lots in certain markets.

Other causes contributing to uncertainty in the marketplace include the looming “fiscal cliff” that will trigger mandatory budget cuts and tax increases at the beginning of next year, pending Dodd-Frank Act regulations that are making financial institutions hesitant to lend since they don’t know how the new rules will affect them, tax reform, and the future role of Fannie Mae and Freddie Mac in the nation’s housing finance system.

NAHB is forecasting a 21 percent increase in single-family starts this year to 528,000 units and a further 26 percent climb to 665,000 units in 2013.

Multifamily housing starts are expected to rise 26 percent this year to 224,000 units and 6 percent in 2013 to 238,000 units.

Expressing a more bullish outlook on housing and economic growth, Mark Zandi, chief economist for Moody’s Analytics, forecast that GDP growth will range in the 2 percent range this year and next and “double that growth closer to 4 percent in 2014 and 2015.” At the same time, he expects job growth to go from two million per year to closer to 3 million in 2014 and 2015.

“A big part of this optimism is the housing market,” said Zandi. “I expect 1.1 million total housing starts in 2013, 1.7 million to 1.8 million in 2014 and over 1.8 million in 2015.”

Zandi noted a range of assumptions behind this rosy forecast, including the expectation that mortgage rates would remain very low, the availability of housing credit will improve as private mortgage lending begins to pick up, and the job market gains traction as policymakers work to resolve fiscal issues, which will ease market uncertainties.

Specifically, Zandi cited three critical fiscal policy concerns:

·     The fiscal cliff. If policymakers do nothing, the combination of pending tax increases and spending cuts set to take effect in January could produce a fiscal drag of four percentage points, Zandi said, which would throw the economy back into recession. “Hiring will remain weak until this is resolved,” he said.

·     Treasury debt ceiling. By late February or early March, the Treasury is expected to hit its debt ceiling. A failure to raise the ceiling would prevent the U.S. government to borrow to meet its existing legal obligations, including the issuance of monthly Social Security checks.

·     Achieve fiscal sustainability. Zandi said that federal government expenditures as a percentage of GDP is 24 percent and revenues is 17 percent. He said this seven-point gap needs to be slashed to closer to two percentage points of GDP. “We need spending cuts and tax revenues to narrow future deficits,” he said. “If we can’t do that, bad things will happen.”

Acknowledging that these challenges won’t be easy, Zandi said his forecast is based on the assumption that Democrats and Republicans will eventually strike a deal on these contentious issues because each side has much to lose. Democrats, he said, don’t want to see tax cuts for the wealthiest Americans and Republicans don’t like the defense cuts mandated by sequestration.

If the nation has the “political will to address the fiscal issues in a reasonable way, I think we will be off and running,” said Zandi.

Delving into the state statistics behind the national numbers, Robert Denk, NAHB’s assistant vice president for forecasting and analysis, cited a range of differences among the states in the amount of pain suffered during the recession and the progress that is being made in recovering.

The hardest hit states — such as Arizona, Florida, California and Nevada — bottomed out the furthest during the downturn and still have much ground to make up.

Meanwhile, several energy producing states – North Dakota, Texas, Oklahoma, Montana and Wyoming – will be back to normal levels of housing production by the end of 2014.

On a national basis, housing starts are projected to get back to 55 percent of normal production by the end of next year and 70 percent of normal by the end of 2014, Denk said.

Leave a comment

Filed under Economy, Housing

JCHS: Over the Next Two Decades, Baby Boomers will Age in Place

Over the Next Two Decades, Baby Boomers will Age in Place

 by George Masnick Fellow
Over the next two decades, the entire Baby Boom generation (age 45-64 in 2010) will cross the 65+ age threshold. Baby Boom homeowners have dominated housing markets for so many decades that it is easy to imagine them exercising a large influence during the next two decades as they move into their senior years. A recent report from the Bipartisan Policy Commission makes just that case, arguing that the next twenty years should see significant additions to the housing stock released by aging Baby Boomers because of discontinued household headship and death.But this report fails to underscore that the vast majority of Baby Boom household dissolution won’t occur until after 2030. Only about 15 percent of the 46+ million units Baby Boomers now occupy will be turned back to the market between now and 2030, assuming cohort household dissolution rates held constant at 2000-2010 levels. This works out to about 1 million total Baby Boomer housing units returned to the market between 2010 and 2020, and another 6.2 million between 2020 and 2030.  For owner-occupied housing, these numbers are 165,000 during 2010-2020 and 5.2 million between 2020 and 2030.  If Baby Boomers are healthier and live longer than their immediate predecessors, these numbers should be even lower. Read More…

Leave a comment

Filed under JCHS

The Geographic Distribution of Households with Nonrelatives

The Geographic Distribution of Households with Nonrelatives

by Robert Dietz — Eye on Housing

A component of pent-up housing demand is the situation of collapsed households — individuals who reside with another household. From a data perspective, we can identify some of these households by estimating the number of housing units that contain individuals who are not related to each other. This is just a part of pent-up demand of course, as it excludes adult children who live with parents or other relatives.

NAHB has previously estimated that pent-up housing demand totals about 2.1 million potential households. The Census Bureau calculated a similar number, reaching 1.9 million households who are “doubled up.” And a recent Federal Reserve Bank of Cleveland study puts the number at 2.6 million potential households.

Data from the 2010 American Community Survey allow us to map the geographic distribution of the households with nonrelatives. The shares of such households are highest in states along the coasts and lowest in the South.

The state with the highest share is Nevada, at 16.4%, followed by Hawaii( 15.5%) and California (15.3%).

The state with the lowest share is Alabama at 8.8%, with both Mississippi (9.8%) and Arkansas (9.8%) at less than 10%.

While these data are likely influenced by recent events in the housing markets, they also reflect cultural differences among the states. Households with nonrelatives includes homes occupied by the decidedly unromantic classification of “cohabitating partners.” This may be a more common practice along the West Coast and the Northeast than in parts of the South.

Excluding such couples, yields “shared households,” but unfortunately the ACS data do not allow an easy mapping of that population group, which has been growing as a direct result of the Great Recession.

Leave a comment

Filed under Housing

The dog days of summer – Americans are losing consumption power because of lower rates at the expense of subsidizing more housing

The dog days of summer – Americans are losing consumption power because of lower rates at the expense of subsidizing more housing. The psychology of today’s boom.

There seems to be this mentality that low interest rates come with no consequences.  While one sector of the economy may benefit from this, primarily the housing and financial system, there are other net losers.  This is also coming at a tremendous cost.  Our public debt is growing at a fast clip and we are likely to breach another debt limit shortly.  While some are narrowly focused on activity in their own markets they fail to answer the broader questions.  Will this trend be sustainable?  Are we simply seeing the pent up demand rushing in thanks to constrained inventory coupled with historically low rates?  Throw in the typical summer seasonal selling heat and it is a recipe for a boom.  I want to look at a longer-term perspective since the cheerleading articles are now out in mass (of course they rarely discuss which high paying job sectors are going to boost real wealth for families overall).  What is the cost of the low interest rate?

Low interest rate drag

I’m not the only one noticing the downside of low interest rates.  The data shows that we are now pushing costs in other areas of the economy:

net interest received

Source:  JP Morgan

So net US household interest income is pushing record lows.  This is actual money coming out of the pockets of American consumers.  One negative aspect being discussed is that this low rate delays retirement for many Americans.  Inability to retire with smaller job selection might be a reason for the persistently high unemployment rate for younger Americans (a key future home buying group).  Since many older Americans shift to fixed income products as they age, a low rate in effective slashes income (i.e., bonds, CDs, etc).  I doubt many retirees are going to be flipping houses as a secondary source of income to Social Security although investments in real estate suggest a chasing of yield.

When we look at savings rates they are abysmally low in the US.  So this is a key reason why FHA insured loans have been a big mover of the current housing market.  Like many readers, I have heard of many first time buyers getting loans or gifts from family members to subsidize their first home purchase.  Yet this isn’t new money being created but equity simply being shifted around.  As the chart above demonstrates, the cost of low interest rates has other impacts in the broader economy.

Has housing really recovered?

Nationwide housing prices do look to have reached a bottom and sales are up.  Yet this bottom is largely due to low interest rates allowing households with stagnant incomes to purchase more home (higher price) and the slow methodical leaking out of inventory from banks.  Yet is this really translating to a better overall economy?

California sales have taken off in 2012.  In many markets bidding wars are back.  Rarely do we ever see a deep analysis of household incomes and their debt-to-income ratios.  Some think just because the government is backing every loan that somehow things are all rosy.  FHA insured loans are seeing a growing rate of defaults.  Keep in mind this is a due diligence loan with a very low down payment.  That is, lenders are examining the total income and debt profile and yet people are still facing problems.  Let us not even discuss the 11 million nationwide home owners that are underwater.

Let us however examine the key metric of the economy with looking at job growth.  Since California benefitted the most from the bubble and took one of the largest hits, let us see how the two sectors linked to housing are doing today:

finance and construction jobs

Construction employment is down 40 percent from the peak and FIRE sector employment is down 17 percent.  You notice a recent trough but certainly no resurgent boom.  These are typically better paying jobs, at least those in the FIRE sector.  California still has a headline unemployment rate of 10.8 percent and an underemployment rate of 20 percent.  These rates are incredibly high and play into the annualbudget deficit issues we face.

The expanding public debt

The rate that public debt is increasing is historical:

public debt

The debt limit was increased from $15.194 trillion to $16.394 trillion on January 30, 2012.  At latest count we already are up to $15.908 trillion (an increase of over $714 billion just this year alone).  At the moment as a safety bet, the US can still attract capital at low rates.  But for how long?

The psychology behind recent buying involves the following:

-Low rates have pushed leverage up even with stagnant incomes

-Rental parity in many markets exists (in some US places it is cheaper to buy than rent)

-Low inventory.  If I’m looking to buy and most do not follow the micro and macro housing trends, they simply ask their real estate agent what is out there.  Limited inventory in better markets causing bidding wars.

The problem of course is that this is not being pushed by underlying stronger economic fundamentals.  As many readers have pointed out, the issues at hand include:

-Globalization of employment and push for lower wages for competition (i.e., Europe, US, etc).

-Younger less affluent future buyers.  How much can they really afford and do they want to buy?

-Bifurcated nature of economy (wealth inequality at record levels)

On the last item, I think this is where we get the many e-mails and stories of “I remember a few decades ago when I was able to buy with my blue collar job.”  In many cases, these people live in equity trapped houses but still find themselves living in a high cost area.  Many will sell but the new buyers are more likely your high income or dual-income household looking for the California property ladder race in a prime location.  Interestingly enough the only stabilizing force was artificially shutting down the inventory pipeline and forcefully lowering interest rates to historical lows.

Based on the bidding war stories you would think that boom times are just around the corner.  Sales have picked up but put into perspective we are returning to more normal volume:

home sales

The big question is longer term.  Here is an interesting psychological twist since some seem so narrowly focused in their own tiny niche market because they bought or somehow have a bias to their area.  Back in 2006 in the early days of the blog the California unemployment rate was 4.8 percent.  Tax revenues were flush.  Home sales and prices were hot.  So I completely understood the argument from some bulls at that time regarding their notion that housing would continue to boom (plus, the real global economy was flush with credit, stock markets were soaring, and more importantly unemployment was very low).  Even then, it was easy to take the other side of the fence perspective.  Today with unemployment in California up to 10.8 percent and with 20 percent underemployment and state budget deficits for years to come, this bidding war mentality that you will be priced out is hard to understand.  Rates are so low, that even a further drop will do very little in purchasing power.  We are already having spillover costs as you can see from the first interest income chart above.  Ultimately some people want to believe that they bought or sold at tipping points in markets.  Yet that would presume we somehow have an open market right now.

It’s ironic that we first went from some denying shadow inventory, to then acknowledging it was there but not an issue, to now having banks essentially leaking out this inventory to control price.  This is not a market by any standards.  I’ve noticed more talk recently of cutting or lowering the mortgage interest deduction by politicians.  Do you think that will have an impact on say a market like California?

Leave a comment

Filed under Home Sales, Housing