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Household Formation and Demographic Trends

Tuesday, June 19, 2012

Facing high levels of unemployment and student loan debt, it is uncertain whether Echo Boomers will be able to absorb the homes left behind by Baby Boomers.

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 BPC Household Formation and Demographic Trends

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Data in the infographic is taken from Demographic Challenges and Opportunities for U.S. Housing Markets, a report prepared for the Bipartisan Policy Center’s Housing Commission by Rolf Pendall and Lesley Freiman (The Urban Institute), Dowell Myers (University of Southern California), and Selma Hepp (National Association of Realtors). Absorption rates are calculated as the ratio of owner-occupied homes released by older households to new homeowner households formed by younger households between 2000 and 2010. The break point between the age groups is age 55 at the beginning of the decade (2000). Authors of the paper divide states into three groups. Strong absorption states, depicted in red, had ratios between 0.19 and 0.50, suggesting the formation of young homeowner households greatly exceeded the number of homes released by older households during this period. In weak absorption states (with ratios of 0.68 to 0.99), depicted in blue, the creation of new homeowner households is much closer to the number of homes released by older households, suggesting demand for new construction will be low.

Why are some states missing?

California, Maine, Minnesota, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Vermont, and Wisconsin are not reflected on either of the maps. These eleven states have “average” absorption rates, between 0.51 and 0.67. The infographic highlights the states where demographic trends from 2000 to 2010 indicate that, if trends continue, there will be a potentially significant mismatch in the available housing stock.