Baby boomers are the “driving force” of household formation, which is critical for real estate demand, according to a new blog post at the National Association of REALTORS® Economists’ Outlook blog.
The highest gains in household formation have been by 65- to 74-year-olds, who accounted for 860,000 new households alone from the first half of 2014 to first half of 2015, according to Census Bureau data. The 55 to 64 age group comprised the second highest at 391,000, followed by people over 75 years of age who formed 264,000 new households during that time period.
Meanwhile, younger age groups had less. The 20 to 24 age group had negative net household formation numbers of 85,000. The 25- to 34-year-old age group, however, had 159,000 new households during that time.
Young professionals have been slow to form their own households. The share of the population living with parents has risen dramatically over the last few years. For the 25- to 29-year-old age group, the percentage has risen from 10 percent in 1980 to 25 percent by 2013. Also, the share of 25-to 29-year-olds who have never been married has dropped from 70 percent in 1980 to less than 40 percent in 2013.
While young adults have been the main drivers of multifamily construction, the baby boom generation will lead the long-term demand for multifamily construction, according to Jordan Rappaport of the Federal Reserve Bank of Kansas City, who recently spoke in a presentation at the REALTOR® University Speaker Series.
Source: “Baby Boomers Lead Recent Household Formation,” National Association of REALTORS® Economists’ Outlook blog (Sept. 25, 2015)