First-Time Buyers and New-Home Demand: Reverting to Normal

Rates on 30-year mortgages down from last year
Time to downsize? Not for baby boomers

First-Time Buyers and New-Home Demand: Reverting to Normal

By Brad Hunter

Our forecast of rising new-home demand is founded on a reversion to long-standing typical behavior patterns.

One of these relates to the “doubling-up” of households during and after the recession.  We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place.

The Current Population Survey for 2013 showed a drop in the percentage of twenty-somethings living with parents. This was the first decline since 2005, back when the speculative foundations of the housing market started to crumble.  The decline may seem tiny when you look only at the percentages: the percentage of people in the group aged 18 to 24 living with parents or a related subgroup fell from 56 percent to 55 percent in one year.  One should bear in mind that the magnitudes associated with these percentages are huge. The one-percentage-point decline amounts to 300,000 people who are now looking for a place of their own who were previously living in their parents’ house.

More improvement can be expected.  A recent study by the Harvard Joint Center on Housing shows that last year 2.1 million more people between in their 20’s lived with their parents than would have typically been the case based on normal headship rates.

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