Things are looking up for the lost generation.
That unfortunate cohort of students ran smack into the Great Recession upon graduation. As a result, they’ve been forced to bed down with their parents for far too long.
Such doubling-up drove the number of new US households to remarkably low levels. From 1997 to 2007, the country created about 1.5 million new households a year. (A household, just so we’re clear, can mean a married or unmarried couple, a family with kids, a few roommates, or two dozen people in a hippie commune, as long as they all share living quarters; for the tortuous full definition of a household, see below*.) In the three years after the Great Recession hit, that number fell to an average of 500,000, according to economists from the Federal Reserve Bank of Cleveland. Things have turned around a bit, with 1.1 million households formed in 2011.
But it’s not as if those who are finally getting away from mom and dad are rushing into a McMansion. By many accounts the behavioral changes wrought by the Great Recession may be here to stay. That’s why in recent years, demand for rental housing has left single-family homes in the dust.
At Morgan Stanley, analysts expect that preference for renting, coupled with tight lending standards at banks, will keep construction of multi-family rental buildings up. “With homeownership rates declining and with household formations beginning to see some cyclical improvement, multi-family starts could run at levels well above the historic norm in coming years and make up a higher share of total starts,” wrote Morgan analysts recently. So if you’re living in a big old moth-eaten house that your grandparents left you, now is the time to max out some credit cards and convert it into apartments.
* From the US Census Bureau: “A household includes all the persons who occupy a housing unit. A housing unit is a house, an apartment, a mobile home, a group of rooms, or a single room that is occupied (or if vacant, is intended for occupancy) as separate living quarters. Separate living quarters are those in which the occupants live and eat separately from any other persons in the building and which have direct access from the outside of the building or through a common hall. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements. (People not living in households are classified as living in group quarters.)”