This post was updated April 14, 2010 to clean up some editing errors and typos.
There has been an ongoing discussion in the general media about whether the term "great" should be applied to this most recent, deep recession.
Well, if you ask the 1.2 million households that were lost from 2005 to 2008, calling it the Great Recession may not even do it justice.
According to a study released this week by the Mortgage Bankers Association, 1.2 million households were lost while the population in the study grew by 3.4 million.
You normally don't see that kind of shrinkage unless you wash your best cotton shirt in the hot water cycle.
The study found that when folks started losing jobs, entire families moved in together. Grown children moved back in with their parents. "Overcrowding," a technical term that measure the number of people per each room of a house, increased five-fold.
So what's the problem? Won't all this shrinkage of households ultimately create pent-up demand, as my colleague Jack Otter asked on yesterday's Ask The Expert: Real Estate podcast?
Ask the Expert: Real Estate
Sure, but not for awhile. In a press release accompanying the results of the study, one of the study authors said it could take another two years for household formation to more normal levels.
"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," noted Gary Painter, Associate Professor in the School of Policy, Planning and Development at the University of Southern California. "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.In the meantime, landlords will have trouble leasing their properties and sellers will have trouble finding buyers.
What do you think? Is this a Great Recession?
- 3 Reasons Why Now Is The Best Time To Buy A Home
- Housing Market Predictions for 2010: How Good Will It Get?
- Mortgage Interest Rates Rise To Highest Level In 8 Months
- Tax Credit Daze: Why It Might Take Months To Get Your Home Buyer Tax Credit Cash
- Are You In Loan Modification Hell? Join The Club
- Want To Buy A Home? So Does Nearly Everyone Else
- 2010 Will Start With Strong Home Sales. But What Happens After The Home Buyer Tax Credits End?
- Jon+Kate Plus 8 Finally Sell Their Starter Home
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and the upcoming Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.