Tag Archives: family formation

In Which I Welcome the WSJ to 2011


The header image at http://deansdale.wordpress.com/

Longtime readers of this blog know that I’ve been talking about Millennials for years now. Back in April of 2011, I wrote a post worrying about Millennials and family formation:

Given the above facts and data, how do you see the Millennials dealing with this issue? Because it’s not a small issue of just boys and girls getting together; family formation drives housing and to a large extent, drives the economy. Men with children work far harder, far longer, than men without — simply because their priorities change the instant they lay eyes on their son or daughter for the first time.

The 230,000 women in the Class of 2008 who cannot mathematically meet a man who is a college graduate… what do they do when time comes to find a husband (or at least a long-term committed boyfriend, willing to provide for her and her children)?

I had discussed the unemployment woes of the Millennials, but one that hits men particularly hard, and the amazing fact that 60% of college students in the U.S. today are women, leading to huge gender imbalance amongst college graduates.

My basic concern was that family formation would remain low, thereby keeping buyer demand suppressed for years if not decades to come.

Well, Nick Timiraos of the Wall Street Journal writes a story yesterday entitled “Rate of Americans Starting Own Households ‘Disturbingly Slow’“. The key graf:

New data show that household formation slowed considerably last year, a potentially ominous sign for the housing market.

Household formation is a key driver of demand for housing. When the economy stumbles and joblessness rises, more people tend to move in with family or double up with roommates. When the economy expands, the opposite takes place as people strike out on their own. Household formation also rises when immigration increases.

Last week, an annual Census Bureau survey showed that the U.S. added just 476,000 households in the year ended in March, compared with an average of 1.3 million in each of the prior two years.

I’d like to welcome Nick Timiraos and the WSJ to 2011!

More seriously, it appears that my fears of three years ago were not that far off. Look at this chart:


Jed Kolko, Chief Economist at Trulia, was cited in the WSJ story:

Mr. Kolko found that the share of young adults living with their parents ticked down last year, which is good news. The bad news: They didn’t form their own households, perhaps moving in with other relatives or friends. This helps explain why the homeownership rate for 18-to-34-year-olds continued to fall last year.

Yes, yes it does. And one might ask what the root causes in dropping household formation may be. Are those causes temporary? Or are they more structural?

I’m voting it’s the latter. Read my original post from 2011 for reasons why. Now add on the fact that there is a real subculture of the ‘manosphere’ (I got the image above from one such blog) that is politically incorrect, sometimes vile, often sexist, and yet growing year over year… and then tell me you’re optimistic about family formation.



Market Opportunity Alert: Maxim Realty

Gratuitous? Probably.

Gratuitous? Probably.

Maxim, of course, is the lad magazine that pioneered the space between GQ, Esquire, and such “gentleman’s periodicals” and Playboy and those magazines wrapped in black plastic on the shelves. I’ve always thought of it as Cosmopolitan for men.

When people talk about “lifestyle real estate”, they usually mean far more genteel brands. From the REThinkFuture’s “Beauty & The Beast” Scenario:

At the high end, a small pool of highly competitive “super agents” emerged, delivering high value life style services.  Many worked across geographies, and some represented leading brands from Versace and Disney to celebrities. In addition, franchises became packagers of brands like Martha Stewart Living, hip-hop pioneer Jay Z, foreign groups like the Shia Mian Network (豕) and Arab developers like Nakheel.

But if you’re in the real estate business, and you’re looking for a lifestyle brand that could actually work today… consider Maxim Realty.


Take the jump, ladies and gents. (Of course, chances are, you won’t consider such a thing, but… there is something to think about here.)

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Real Estate Hope and Change for the Hope and Change Generation

My friend Eric Stegemann, a Millennial himself, tweeted out the following article from BusinessWeek talking about the “Lost Generation” of Homeowners:

For some analysts, the scariest outcome of the collapsed home-price bubble is that it could turn an entire generation of would-be homeowners into perma-renters. Yale economist Robert Shiller floated the idea of a “lost generation” of homeowners in interviews with Reuters and Yahoo Finance. He thinks there is a chance that home prices in the suburbs may never rebound in our lifetimes.

I’ve been writing, talking, and thinking about Millennials/Gen-Y for quite some time now. It’s kind of a pet hobby. And for the Hope ‘N’ Change generation that went out for Obama in a big way in 2008 (2 out of 3 voted for the young cool hipster over that old and crusty McCain fella), they sure are facing a whole lot of Change even if that Hope thing is a bit thin on the ground.

Let’s chart some of these.

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Three Questions on the NAR/Bipartisan Policy Center Paper

The Bipartisan Policy Center — a think tank based in Washington DC once described as the place “where moderate Republicans go to embrace their inner liberal” — has released a new study in conjunction with NAR, the Urban Institute, and USC that is worth reading in full if you’re interested in topics like future of housing. Entitled “Demographic Challenges and Opportunities for U.S. Housing Markets“, it is a thoughtful academic treatment of the impact of demographics over the next couple of decades.

The key takeaways:

  • There will be a lot more old people in the next 20 years.
  • Old people sell houses
  • Young people buy houses, but current crop of young people (Millenials and younger) are suffering
  • Black and Hispanics hardest hit

Most of the paper, actually, is restatements of the obvious, such as “Over the next two decades, the U.S. housing market will depend on Echo Boomers”. You don’t say! Since Gen-Xers like me are in our 40s, 20 years from now, we’ll be in our 60s and looking forward to retirement (if such a thing exists by then). Who knew that the largest cohort since the Baby Boomer would be important to housing?

Nonetheless, the study concludes, “Notwithstanding predictions of a coming “rentership society,” however, none of the scenarios indicates a reduction in the overall U.S. homeownership rate below 60 percent before 2030.” (p. 18) The authors project that somewhere between 21 million and 25.5 million new households would form between 2010 and 2020:

The range of estimates in these scenarios can be attributed to different rates of household formation for Echo Boomers. Under the low scenario, people between 15 and 34 years old in 2010 (a span that includes Echo Boomers plus five years of the Baby Bust generation) would form 15.6 million new households between 2010 and 2020. Other cohorts would account for the formation of an additional 5.4 million households over the same time period (Figure 1). The medium scenario would result in 17.1 million new Echo Boomer households and 6.1 million other households. The high scenario, finally, yields 18.8 million new Echo Boomer households and 6.7 million new households from other generations. (p. 15)

And homeownership rates among these new households, the authors figure, would range from a low of 40% to a high of 67%, adding anywhere from a low of 3.8 million new homeowners to a high of 10 million from 2010 to 2020. (p. 16)

Although the authors do not make any recommendations for policymakers, it does seem to me from the overall narrative — the elderly will need lots of help, the young are being crushed financially, and black and Hispanics were hardest hit — that the paper is intended to spur government action to subsidize housing. Which, as a fan of the industry and all, I’m happy to consider, of course.

But there are three trends and factors that are simply not discussed in the paper, all of which have been much in the news of late. That glaring oversight makes me wonder if these projections are not wildly optimistic. Since I’ve been dabbling in the whole demographics angle — especially of Millennials — I figured, I should point those out and see what people thought.

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Millenials and Family Formation

Travis Robertson is one of my new friends from RETech South. He’s one of the brightest, most thoughtful young men I’ve met in recent years, and I think the world of him. And of course, when I can debate significant issues with intelligent people I genuinely like, that’s pretty close to nirvana for me. Well, adding a few mugs of beer and doing it in person would be best… But lacking that, Travis and I agreed to carry on a series of blogposts in which we debate the impact of the Millenials (sometimes called Gen-Y).

First, let me urge you to watch Travis’s speech at RETechSouth. It’s an hour long, but it’s fully worthwhile, if only for yours truly being mentioned in an amusing context:

This is going to be a topic we won’t settle in one post. But longtime readers know that I’ve been skeptical about the Gen-Y’s future for a variety of reasons. I’m already on record as suggesting that real estate won’t be saved by the Gen-Y; Travis agrees, but suggests Gen-Y will change real estate.

Well, every generation changes the world around it. But what I’d like to challenge is the phenomenon of Millenial Triumphalism, in which the Gen-Y and its enablers make the kind of statements about why Gen-Y is unlike any other generation that came before it, and talk as if the Millenials are the change that they’ve been waiting for. My admittedly more tempered view is that before the Millenials will change the world, the world will change Millenials.

In this post, let’s talk specifically about family formation — the topic that spawned my comment about polygamy — as one of the driving factors behind home sales is family formation: people meeting, falling in love, getting married, and starting a family.

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