Slow Household Formation Cyclical Like All Things Real Estate: Moody’s

Though the slow rate of household formation among millenials—those born after 1980—has been cause for alarm among some economists, analysts at Moody’s Investors Service say reports of a “lost generation of homebuyers” are overblown.

The Census Bureau released in early November its homeownership rate report for the third quarter, revealing that homeownership in the 35 and younger age group continues to grow at a sluggish pace, with 31.6 percent still living with their parents.

The report was a dismal sign for some commentators, who noted that slow household growth demonstrates young adults are still struggling to find their economic footing.

Indeed, Joseph Snider, VP and senior credit officer at Moody’s, points to data from Pew Research that shows 36 percent of millenials have been forced to move back home with their parents as they deal with slim employment prospects and crushing student debts. Further, today’s young workers are now on average 30 years old before they’re able to earn a median wage income of $42,000 compared to 26 years old in 1980.

However, Snider argues that these types of circumstances for young people are nothing new.

“While today it may sometimes seem that the American dream will be closed to an entire generation, the fate of the millennial marks only the latest seemingly permanent condition facing the homebuilding industry, where all things tend instead to move in cycles,” he said. “Just as shrinking home sizes eventually proved a cyclical rather than secular event that reversed when the downturn ended, the malaise affecting the world’s strongest economy will not last forever.

“We believe millenials will follow every generation that preceded them, buying homes once their economic situation improves,” he continued.

Summing up his perspective, Snider offered a paraphrase of a quote from the movie classic Field of Dreams:

“Millenials will come. They will most definitely come.”

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