With Apologies to Harvard ...

Yikes! Where are all the new families forming households?

Housing bulls argue that the the underlying demand for housing is strong. The bullish Joint Center for Housing Studies at Harvard University, in its State of the Nation’s Housing 2007 report, said that because of immigration, natural population growth, etc., the net growth of households, which was 1.26 million a year from 1995 to 2005, would rise to 1.46 million a year from 2005 through 2015.

Umm, professors? Better take a look at the actual numbers. They’re disappointing. If you download data from the Census Bureau and run it through a spreadsheet, you’ll find that household formation fell off a cliff in the past year. After growing at a rate of 1.2 million a year from 2002 through 2006, the number of households grew by just 415,000 from the first quarter of 2006 through the first quarter of 2007.

Where are all those missing households? Presumably living with their parents, or sharing quarters with roommates. It’s easy to assume that demographics is destiny when it comes to housing, but this sharp decline shows that money matters, too. It seems as if many people postponed buying homes (and forming new households) because it suddenly seemed like a bad deal. No doubt the rate of household formation will pick up again, but in the short run this is another depressant for an already depressed housing market.