|Title: ||MBA: An Estimated 1.2 Million Households Were Lost During Recession|
Washington, DC (April 7, 2010) – 1.2 million households were lost from 2005 to 2008, despite the population increase of 3.4 million in the study area, as
Americans experienced one of the deepest recessions in decades, according to a study released today by the Mortgage Bankers
Association (MBA). This decline in households is likely what contributed significantly to the excess supply of apartments
and single family homes on the market.
The study entitled, “What Happens to Household Formation in a Recession,” which was conducted by Professor Gary Painter of
USC and sponsored by the Research Institute for Housing America (RIHA), analyzes the impact of economic and housing conditions
on household formation and how the recent recession has affected Americans’ propensity to form new households, mobility trends,
and changes in the rate of overcrowding.
“With such a significant drop in households nationwide, it is clear the most recent recession impacted individuals’ decisions
to move out on their own and caused many Americans to join already formed households,” said Gary Painter, Associate Professor
in the School of Policy, Planning and Development at the University of Southern California. “Due to data limitations, my
analysis had to focus on household formation as of 2008. Clearly, given the depth of the downturn in 2009, and the ongoing
weakness in the job market through the beginning of this year, this study gives no reason to expect that household formation
has picked up at all.”
“This study clearly indicates that household formation will only pick up once the job market stabilizes. Young adults need
not only a paycheck, but also a sense that they have sustainable employment before striking out on their own,” continued Painter.
“Typically, many new households are renters, but if young adults postpone moving out, some may have the ability to save for
a downpayment, causing them to skip the rental stage and move right to homeownership.”
“Given the strong tie between unemployment rates and household formation, household formation will likely return to normal
levels by 2012 as unemployment rates decline over the next two years. There is no demographic silver bullet that will solve
the supply overhang we are seeing in many housing markets around the country. The housing and mortgage industries will feel
the impact of this reduction in the number of households for years to come,” Painter continued.
Michael Fratantoni, MBA’s Vice President of Research and Economics added, “We hear stories about young adults remaining in
or returning to the nest after college and of households doubling up. We wanted to go beyond the anecdotes to provide our
members with hard numbers on the trends in household formation that will impact demand for both single-family and multifamily
The study includes analysis of data from the past 40 years, a period covering 6 recessions, to examine the historical impact
of recessions and associated elevated unemployment rates on the formation of new households.
Key findings from the study include:
• In a recession, the likelihood that a young adult will form an independent household falls by up to 4 percentage points
depending on the age of the person and severity of the changes in unemployment rates. In this particularly severe recession,
this prediction has been borne out with data through 2008 revealing a reduction of nearly 1.2 million households nationwide
despite the continued increase in population and likely even more households lost in 2009.
• Though the national homeownership rate has fallen from a peak above 69 percent to just over 67 percent, this decline may
be understating the magnitude of the change when we take into account the simultaneous drop in renter household formation.
In fact, the rental market saw a steeper decline in new households formed than the homeownership market. As a result of this
drop, the denominator in the homeownership rate calculation has been reduced, mitigating the decline in homeownership.
• This recession has also caused a dramatic increase, almost five-fold, in the rates of overcrowding (defined as having more
than one person per room in the household), indicating that many families are doubling up in response to the downturn.
• Overall, there was a greater impact on the creation of new households among native born Americans over new immigrant households.
The data show native born Americans experienced a larger decline in household formation and a larger increase in overcrowding
rates than immigrants.
• Children whose parents have higher incomes are more likely to remain at home, with this effect largest for youths moving
into the rental market. However, children whose parents have higher financial wealth are more likely to form their own new
To obtain a copy of the report, please visit the RIHA website at http://www.housingamerica.org
The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry
that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the
association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand
homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and
fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety
of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies,
mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending
field. For additional information, visit MBA's Web site: www.mortgagebankers.org.