Don't Be Distracted by the Recent Swings in Household Formation Estimates
Household formation is essential to the growth of U.S. housing markets – it generates demand for about three out of four new housing units. When the Census Bureau's fourth quarter 2014 Housing Vacancy Survey (HVS) reported that annual household formation jumped to nearly 2 million, analysts became hopeful that this fundamental market driver had finally broken out of its post-crisis doldrums. Unfortunately, that optimism has been short-lived. The last two quarterly estimates from the HVS have shown household growth plummeting to only about half a million per year – a level not far above the worst readings from the Great Recession.
In a new edition of Housing Insights, Fannie Mae's Economic & Strategic Research Group explores the factors underlying the recent volatility in HVS household growth estimates, and develops an alternative household growth series that is based on a smoothed trend in housing unit occupancy rates and a new set of housing stock estimates.
Read our latest edition of Housing Insights and hear from the author, Patrick Simmons, in his related FM Commentary.