Study Estimates 1.2M Households Lost Due to Recession

Dees Stribling, Contributing Editor

Washington, D.C.–A new study by Gary Painter, sponsored by the Research Institute for Housing America and released this week by the Mortgage Bankers Association, says that about 1.2 million U.S. households disappeared during the years 2005 to 2008. That despite a total population growth nationwide during the period of 3.4 million.

“With such a significant drop in households nationwide, it is clear the most recent recession impacted individuals’ decisions to move out on their own,” said Gary Painter, associate professor in the School of Policy, Planning and Development at the University of Southern California, noted in a statement. The findings quantify what apartment owners know from recent experience–not nearly so many people are out looking for apartments these days as only a few years ago.

The study, called “What Happens to Household Formation in a Recession,” details an important factor in keep average apartment vacancies high, despite the fact that the percentage of owner-occupied households has dropped because of the recession, from about 69 percent to 67 percent in the last three years. In this recession, the study found, young adults are failing to form an independent households–which usually means moving into an apartment–at a much faster pace than former householders are occupying rental properties.

Besides, many of those former householders aren’t moving directly into an apartment, which is a hard thing for the chronically unemployed to do. Instead, they’re moving in with someone. The study found that the recession has caused a dramatic increase, almost five-fold, in the rates of overcrowding, which is defined as having more than one person per room in the household. Many families are simply doubling up in response to the downturn, which does no good for apartment occupancies.

Because not all the relevant data was available for crunching, the loss of households in 2009 wasn’t calculated for the study. But that total is certain to be more bad news considering the state of the economy and the massive job losses, especially in the early quarters of last year. The study offers no reason to expect that household formation picked up at all last year.

Eventually, however, household formation will resume an upward trajectory, though it will probably be a slow path to recovery. “Given the strong tie between household formation and unemployment rates, household formation will likely return to normal levels by 2012 as unemployment declines over the next two years,” posits Painter. “But there is no demographic silver bullet that will solve the supply overhang we are seeing in many housing markets around the country.’

If the job market does recover, will that benefit apartment owners? Not necessarily, continues Painter. “Young adults need not only a paycheck, but also a sense that they have sustainable employment before striking out on their own,” he explains. “Typically, many new households are renters, but if young adults postpone moving out, some may have the ability to save for a down payment, causing them to skip the rental stage and move right to homeownership.”