357,000 new households were formed nationally during the 12-month period ending March 2010, according to data recently released by the Census Bureau (the Bureau) — an alarming plunge from the 1.3 million annual average increase between 2002 and 2007.
Nationwide household formations have reached their lowest level since 1947. The economically stagnant Generation Y, with record levels of college debt and a tendency to delay marriage, has prolonged entry into homeownership and kept the 2010 supply of vacant homes at record highs – even with significant decreases in new home construction.
A continued lack of consumer confidence coupled with severe unemployment kept the nation’s annual vacancy rate at 14% in the second quarter of 2010, with no change from 2009. It settled around 8%-10% in the 1990s through the early 2000s.
The 2009 year-round vacancy rate in California metropolitan areas was:
- 12% in Bakersfield, up from 9% in 2008;
- 6% in Los Angeles, up from 5% in 2008;
- 5% in Ventura, with no change from 2008;
- 12% in Riverside, up from 10% in 2008;
- 13% in Sacramento, down from 15% in 2008;
- 10% in San Diego, with no change from 2008;
- 10% in San Francisco, up from 9% in 2008; and
- 6% in San Jose, with no change from 2008.
first tuesday take: As Generation Y (those born in the ‘80s and ‘90s) graduates from college and ages into a demographic of potential homebuyers, external economic conditions (read: lack of suitable employment) and massive student debt are delaying these twenty-somethings from forming their own households. The high number of vacant apartments and unsold homes is an unfortunate symptom of this Generation Y’s limited housing options, which often require cohabitation with parents or friends in shared living quarters.
Unemployment, student debt and the demand for a higher standard of living have forced Generation Y to put off the purchase of a home until they can finance exactly what they want. California vacancy rates in urban areas trend lower than the national rate since more individuals are moving closer to their jobs and the nuclei of culture and entertainment, which are most often large cities. [For more information regarding Generation Y’s postponed entry into homeownership, see the October 2010 first tuesday article, The demographics forging California’s real estate market: a study of forthcoming trends and opportunities — Part I.]
Until this age group of professionals and intellectuals feels comfortable enough with their vocations and lifestyle goals to settle down and move forward with homebuying — which won’t be until 2015-2020 when employment swells and the market gains momentum — agents should familiarize themselves with the cultural intricacies of Generation Y in preparation for when this demographic roars to life. [For more information regarding the weight of student debt on homeownership, see the July 2010 first tuesday article, College debt makes graduates hesitant to become homeowners.]
Selling agents who successfully represent this faction of young buyers will label themselves as urban neighborhood experts, and make themselves available through various social network profiles. It will be up to the selling agent to convince the Generation Y demographic that owning a home is the next prudent step on their journey towards success, independence and the accumulation of power.
Re: “Housing glut blames on drop in people forming households” from Big Builder