Baby Boomers Lead Recent Household Formation

The United States Census Bureau compiles data on households through the Current Population Survey, a joint project with the U.S. Bureau of Labor Statistics. Based on the latest data, there were 124.5 million households in the U.S. in 2015. The number of households in 2015 was 0.5 percent higher than in 2014.

Household formation (HHF) is an important driver of real estate demand, both for single and multifamily properties. Household formation averaged 1.3 million every year over the 1958-2007 period. Between 2008 and 2013, the average number of new households dropped to 579,000 per year, underscoring the severity of the Great Recession and ensuing slow recovery. In 2014, net HHF jumped to 2.2 million, as employment growth encouraged more young people to strike it on their own. In the second quarter of 2015, HHF continued the upward trends with the addition of 480,000 new households.

When looking at recent HHF data by age, Baby Boomers are the driving force of growth. Based on data comparing the first half of 2014 with the first half of 2015, the highest gains in HHF were recorded by 65-74 year olds, who accounted for 860,000 new households[1]. The 55-64 age group accounted for the second highest HHF figure—391,000. The group with the third largest HHF number was made up of people over 75 years of age, who formed 264,000 new households during the twelve month period.

The younger age groups had mixed HHF numbers. In the 20-24 age range, there was a negative net HHF of 85,000 households. The 25-34 year old group proved the only bright spot, with 159,000 new households.

Separately, in a recent presentation at the REALTOR® University Speaker Series[2], Jordan Rappaport of the Federal Reserve Bank of Kansas City outlined several important trends in household formation and its impact upon multifamily home construction:

• The share of U.S. population living with parents has risen from 1980 – 2013 across the age spectrum. For the 25-29 year old group, the proportion increased from a little over 10 percent to 25 percent over the period. The increases became smaller as the data moved higher in the age ranges, however the trend remained noticeable.
•  The share of the population to have ever been married declined significantly. For 25-29 year olds, the percentage dropped from about 70 percent in 1980 to less than 40 percent in 2013. The decline in marriage was present in each age group up to 65-69 year olds.
• The age at which adults have children has been steadily rising.
•  For seniors, the share living with a partner has increased over time. For the 75-79 year old population, the proportion of those living with a partner rose from about 30 percent in 1980 to approximately 50 percent in 2013.

His conclusions are that while young adults have been the main driver of the recent rebound in multifamily construction, the baby-boom generation will be the leading force of the long-term demand for multifamily space and constru