Stagnant incomes and rising rents left the US with an unprecedented number of doubled-up households as people moved in together to make ends meet. That is according to locally based Zillow.
The firm says that all those roommates have changed the American housing landscape, with 5.4 million households that would exist under normal conditions instead lost in guestrooms and basements, sharing space with friends, family and roommates, waiting for better economic times.
According to Zillow analysts, more than a third of working adults are living in doubled-up households, driving the median household size up to 1.83 adults in 2012 from 1.75 in 2000. The phenomenon is concentrated in markets where rent has most outpaced income, notably in California and Florida, says Zillow.
In the Riverside, CA metro area, for example, under normal conditions, there would be 12.6% more households. In the Miami metro, more than 230,000 households—11.3% more households than currently exist—were lost as people doubled up.
As the housing market becomes friendlier for buyers and the economic recovery continues, those lost households could represent a significant source of pent-up demand in the market as they begin to look for a new place to live, Zillow analysts say. “The rise in doubled-up households is a troubling sign of the times and starkly illustrates one of the prime drivers behind weak home sales these days,” says Zillow chief economist Dr. Stan Humphries. “But there is a silver lining behind this data.”
Humphries explains that “like a coiled spring, all of these doubled-up households represent tremendous potential energy for the market. If and when these compressed households begin to unwind and these millions of Americans do start to create their own households, demand will bounce back, possibly even causing household growth to outpace population growth.”
That added demand will, in turn, he continues, “create more incentive for builders to construct more homes, and will help unblock the market. There is no magic bullet, but continued home affordability, an increasing supply of both for-rent and for-sale homes and the potential for incomes to grow more quickly as the economy recovers will all help the market to realize this potential.”
There is an increasing number of baby boomers who are selling their homes and moving into apartments, driving additional multifamily demand, says Goodman.
There is definitely a “silver lining” when it comes to the demand for apartment living, Gary Goodman, SVP of Acquisitions at Passco Cos. tells GlobeSt.com. “As job growth improves, those that were forced to double up during the recession are now parting ways, and are getting their own places.” In addition, he says, “those in the Gen X and Millennial generations are now moving out of their parents’ homes to rent for the first time. Interestingly, we are also seeing an increasing number of baby boomers who are selling their homes and moving into apartments, driving additional multifamily demand.”
For many, Goodman continues, “owning a home today is simply not an option due to student debt, strict underwriting requirements, and not to mention the hefty down payment requirements. The home ownership rate continues to decline, and is currently the lowest it’s been in 19 years, at 64%.”
Many home owners, he adds, are also selling because they don’t want to deal with the headaches of owning a home anymore. “Despite the fact that the economy is getting better, people are simply not gravitating toward single family home ownership. And with the home market continuing to be flat, the interest in the rental market continues to climb.”