They're latent demand. All the twenty-somethings who have returned home to cut expenses could be a big part of any recovery in housing.
Amid recession, fewer households are formed, in no small part because more family members live together to cut down on expenses. In particular, the kids aren't so anxious to be out on their own these days:
The number of 18- to 24-year-olds living at home increased by 300,000. This recession has been particularly hard on younger workers. The number of jobs held by 20- to 24-year-olds declined 4.5 percent in 2009, while the number of jobs held by people over the age of 25 dropped 1.8 percent.As Mr Glaeser notes, slow household growth puts off housing market recovery, which prolongs the period during which residential investment and construction aren't contributing very much to output. And that's true. But I think it's also probably worth recognising this as a source of shadow demand. Shadow housing supply, recall, refers to housing units held by banks and homeowners who'd like to sell their properties but who are waiting for better market conditions. It is supposed that any brief uptick in housing could quickly lead to renewed decline as shadow supply hits the market.
But it's also likely that there is shadow demand in the system. I suspect that as economic conditions improve, twentysomethings living at home will quickly look to move out and start their own households. This, in turn, will support housing demand, housing prices, and housing construction, buoying the initial uptick.
To put this another way, everything comes back to unemployment. If you get steady job growth, many housing concerns (though not all) will begin to take care of themselves. Unfortunately, America has still had only one month of payroll growth since the onset of recession. [More]
Working from only a few anecdotes, I wonder if this phenomenon isn't muted in agriculture as ag college graduates still seem to be finding work in the relatively robust agribusiness sector. And while living with the parental units may be a drag in town, it's the pits in the country.
Still, any difficulty finding work for Junior may evince itself as added (as if we needed any) pressure to expand the farm. I find that part of my thinking with Aaron home now, and while hard to parse out from any rent data, I'll bet it's adding $30-50 per acre to rents.
In conversations yesterday in NE with some younger producers (and wannabees) I thought I also caught a glimpse of fathers reluctant to step down because they suddenly can't pencil out a comfortable retirement from their savings. It takes a wad of moolah to support a condo in FL at 3% returns. So the succession escalator is stopped for some.
Those with owned land they could rent for big bucks are different, but guys who had the good fortune to rent 1-2 big acreages on shares for twenty-plus years for example, had little reason to take the plunge into expensive ownership.
Poor guys are left with nothing but money.