Money, Marriage, and the Housing Crisis
According to recent figures from the Census Bureau, couples are postponing marriage until their financial situation improves. The number of new households being formed is at its lowest level since 1947. This phenomenon is helping to keep the supply of unsold homes at record levels.
People are worried about losing their job or finding a job and are not thinking about buying a home. College graduates, who normally get a job and their own place to live after graduating, are moving back in with their parents because they cannot find a job. These graduates are not contributing to shrinking the housing supply.
The foreclosure crisis itself does not account for the oversupply of homes. When a house goes back to the Bank, these people still need a place to live. When these people "double up" in a rental, move back in with their parents, or become homeless, the demand for homes decreases and this increases the supply of unsold homes.
In normal times, new household formation would be about 1.25 million a year. From March 2009 to March 2010 the number of newly formed households was 357,000. Additionally, the number of new homes being built has plummeted because the underlying demand for new replacement homes has virtually vanished. Construction activity is a major employer and unemployed construction workers represent a significant portion of the unemployed.
There is a pent up demand for housing. These people that are doubling up don't want to be in that situation. They want to be on their own. They want to feel successful. They want to raise their own families in their own home. The oversupply of homes is not going away until these people find jobs and are confident that they can keep that job.
The housing industry had traditionally helped pull this country out of recessions. This recession is so perverse, for so many reasons, that it has reached down and altered the basic fabric of American life.
To view a related article on this subject, please read What has Happened to the American Dream?