Household Formation Is Up, Home Sizes Are Down
Recent data from the National Association of Home Builders and the Census Bureau points to a transition from renting to owning which is pushing up household demand. The Bureau’s most recent measure of household formations, a key driver of housing demand, revealed that the count of total households increased to 122.4 million in the last quarter of 2018, from 120.1 million a year ago.
The gains are attributed to strong owner household formation, as the number of homeowner households has been climbing since the third quarter of 2015. The number of renter households has been falling.
According to NAHB households ages 35-44 marked the largest gains among all households, up 2.2 percent from a year ago. The homeownership rate of millennials, mostly first-time homebuyers, stood at 36.5 percent in the last quarter, a half percentage higher than a year ago. This indicates that millennials are gradually moving into the for-sale housing market.
The average home size seems to reflect that homebuilders are working to meet the needs and budget of these additional millennial households. According to fourth quarter 2018 data from the Census
According to NAHB, Quarterly Starts and Completions by Purpose and Design, median single-family square floor area dropped to 2,316 square feet. NAHB predict home sizes will continue to trend smaller as builders add more entry-level homes into inventory seeking to address affordability.