1.2 Million Households Lost In The Great Recession

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.

What do you think? Is this a Great Recession?

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Ilyce Glink

Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.

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