The last economic recession was marked by an upheaval in the employment landscape, and the seven years of “recovery†have yet to undo all of the damage that was done. Millions of people still need a job, and millions of others are now earning far less than they previously were. Despite these depressing facts, history is likely to show that the glacial shift in housing may eventually become the distinguishing feature of the Great Recession.
In April, new home sales posted their best month since January 2008. According to the Department of Commerce, this finest result in more than eight years places the seasonally adjusted rate at 619,000 units per year. Before you get too excited, that’s about the same annual rate as January 1994, July 1984, July 1973, and February 1964. In other words, it’s been at this level in every one of the past five decades. Additionally, it was never lower than its current rate of 619,000 units at any time during the nearly 13-year stretch between April 1995 and January 2008. If that is not depressing enough, new home sales still have to climb another 124% to get back to their July 2005 level of 1.4 million.
Homeownership rates peaked at 69.1% in 2005. The year-end 2015 rate of 63.7% is the lowest in 49 years. The quantity of rental units stayed in a tight range of 33.0 million to 35.2 million for the 20-year period spanning from 1988 to 2007. Since then, they have marched higher each of the past eight years and now stand at 42.6 million—a 20% jump from 2007. Meanwhile, the quantity of owner-occupied housing units has decreased from 75.2 million to 74.7 million during the same period.
These statistics are based on units—not on population. I am of the belief that population-based housing statistics would show an even larger shift. The percentage of the population still living at home with their parents has increased substantially. This not only reduces the need to build additional rental units, but it also increases the population living in “owned†housing units, even though it is owned by their parents.
