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More Housing Bad News: Household Formation At 30 Year Lows
It was a little over two years ago when, scrambling for the next catalyst to justify a home price rebound (which as we then said and have subsequently been proven right was rising only due to three factors: i) offshore oligarchs parking laundered "all-cash" money in luxury US real estate: a process that is slowly ending, ii) Wall Street firms using cheap REO-to-Rent credit to bid up distressed properties and flip them as rentals: a process that is virtually over and iii) banks hoarding foreclosed properties on their balance sheet to avoid an avalanche of supply which would crush prices: this has yet to be unwound) some of the more "rose-colored glasses" media outlets came out with bombastic titles such as this one: "The Most Overlooked Statistic in Economics Is Poised for an Epic Comeback: Household Formation."
While the article was quite correct in suggesting that household formation is very overlooked, the reality is that it is overlooked for a good reason: it refuses to play along with the broader recovery theme, which is a simple one: if there is to be a real housing recovery, households have to be formed at a much faster pace. Where the article also epically wrong was in its fundamental thesis: contrary to the author's expectations "backed" by many pretty charts not only has household formation not made a "comeback", it has crashed. In fact, according to Census Bureau data, in Q1 the number of households formed each month was 189,000, down from 1,563,000 in 2013, dropping more or less in a straight line since the article's publication!
For the visual we go to Bank of America's chart of the day, which shows a very unpleasant story for all those who keep betting that an "epic comeback" in household formation, and of course the economy, is just around the corner.
Here is what BofA had to say about this:
Equilibrium household formation: In equilibrium, home supply (new completions + excess vacant properties for sale + manufactured homes) should equal home demand (household formation + demolitions + second home purchases), assuming that builders were able to gauge market trends and build to meet the changes in demand. We can derive an equilibrium measure of household formation by solving for the variable based on the assumption that supply equals demand. It shows a clear downward trajectory in household formation with little recovery thus far, similar to the trend in the actual data.
And now time for the spin: apparently households aren't formed when it is cold outside (see: harsh weather which claimed some $100 billion in lost GDP output in Q1), and the ongoing collapse in household formation, which is now at 30 year lows, means the rebound, if it ever comes, will be that much more pronounced.
Actually, come to think of it, tt really is not that difficult to spin any horribly ugly data point when one's only fallback is endless optimism about the future.
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Get those fusion reactors online damnit!! Households need to plug into something (even if the occupants are unemployed).
Tick tock motherfuckers.
No, there's household formation alright.
It just happens to be in tents and old RVs these days.
A 1984 (same year I graduated) Vogue IV sits in my driveway and is now my son's "apartment." He gets it rent free, but he has to come inside often 'cuz the fridge is broken.
I HATE motor-homes.
Chart also looks like % not 'participating' in the 'workforce'
where do they come up with these titles?
No one really wants to address the fact in the future, America's population is going to decline rapidly. Yes, immigrants can become Americans if forced into our culture with is not PC, no one forces them to be "American" so it is hard to call them true Americans. Thank you failed liberal policies!
I lived in a 33ft Holiday Rambler after my first divorce. I still have it, its parked on a private lot I own. My second wife was the only babe to date me again after seeing my home. the others , for some reason, wouldn't come back. Go figure
30 year lows? ...Hows that 30 year bond suckers bought 30 years ago?
EVERYBODY CLICK THEIR HEELS AND START THUMBSUCKING!!
THAT WILL SAVE US!!
Hey Yellin.....about that taper. <chuckle>
Banksters can solve this with no-doc loans. There is always a fraudulent solution to boost the coffers of the banksters, Onward from the 125% LTV to 250% LTV.
When it all crashes they can run to the Whitehouse for trillions more of a bailout.
"When it all crashes they can run to the Whitehouse for trillions more of a bailout."
why? they've already got 3.2 Trillion in excess reserves, courtesy of the Fed's printing. the Fed "prepaid" the next bailout.
Yeah, all that money and not a DIME has reached my pocket
BULLISH!!!!
it's FRIDAY and I want my "GREENIE", please Janet, hear our prayer!
WTF you mean high prices stop household formation...but the F'FED thinks high prices are good! Oh wait the FED think high prices are good for crooked bankers and Private Equity insiders to flip homes. A retard knows the bubble is back and is going to end poorly...well except Bernanke and Krugman who are the faces of retard economists!
More bad news = more new lifetime highs; FORWARD!
The author fails to bring up one very important aspect. The break down of the family unit will factor into this as well. The days of a couple getting married, buying a house, having a couple of kids has been replaced with knocking up your girlfriend then ditching her a year later and moving back into your car and collecting welfare. The family unit is dead as we know it. No family unit = no households formed.
You may have found the very solution. Much like including cocaine and hookers in GDP they can now include cardboard boxes and living in one's car in household formation. "To Infinity And Beyond!" -Buzz Lightyellen
Yep, and it's all the fault of the gays. Ruining traditional marriage. We already have at least half of all marriages in this nation ending in divorce. Just wait until us queers get through with marriage. We'll decimate it for good.
I remember coaching a youth sports team back in the early 1990s. I kid you not - half of the team came from broken homes of some sort. I doubt anything has changed, at least for the better.
As long as we keep pushing this "abstinence until married" BS, things will get worse and worse. Inner city, rural areas - it's all the same. Be ignorant of sex and normal body behavors until you get hitched at 19 years of age, and then watch everyone be shocked at the consequences and outcomes.
I'm originally from a small town in Western Pennsylvania, where my family all still reside. My nephew knocked up his girlfriend when he was 22. They got married soon thereafter. Even my religious mother implored them to not do it unless they really loved each other. They did. They were divorced two years ago, and now have two children being tossed back-and-forth from one place to another practically every other day.
America!
Oh, I suppose the gay thing will be a factor, but mostly it's just a break down of good morals, high self esteem, good parenting and the desire to amount to something in life.The consept of "traditional marriage" is dead except for all those religious zealots. Good for them, though. In this little town I live in, it's whats kept it a decent place to live.
I ran a skateboard shop for 5 year. 90% of those kids came from broken homes. On top of that, most of their parents were flat out assholes. All of them pretty much fit the "spawn em and flee" catagory.
Myself, I had a LOT of fun as a youth and never knocked up any of my girlfriends. I knew if I did, my life would change drastically and I'd be married and working to raise a kid. Now.... the government will cover you for your stupidity.
Abstinence until married is the problem? What planet are you living on? We are the most over sexed people in the history of the world.
We also are a society that is, at the same time, taught and told to be ashamed of our bodies.
We're schizophrenic that way.
Society glorifies sex, and fucking. Shame and modesty left long ago, unless you have been living under a rock. Hook up? Friend with benefits? If you are NOT fucking, you are derided. So spare us that shit.
Condoms, planned parenthood, etc. is everywhere. No shortage of breeding going on. Go to your local high school and see the pregos walking around. Or your local welfare office.
The state has taken over for daddy. You now see the results.
Young men are not getting married since most of them come from broken homes (and saw how poor old dad got the shaft). No sympathy for dad here....he picked her (and vice versa).
Now bitchez....go pay your child support.
Anyone else noticing more and more spelling/grammar errors in articles on ZH? They seem to be common in every article now.
no, they've always been there.
Flippers and res. real estate scum lords are going to take it in the rectum, when this fake POS Fed MBS driven monetized joke of a bubble gets pricked by the right mosquito.
Yup...new lows today, or highs depending on your pespective. Check out all the typos on this article.
Here Is What The Slide In Gold Is Being Blamed On (Hint: Weather)Interesting article marred by really bad typos. Even with all this technology? Come on ZH, be the news source that actually proofs their work, nobody else does.
check out BOA giving 1,000 "vacant" homes to wounded warriors around the nation. one way to get rid of the inventory.
and gow is the cardboard boxes industry doing?
slumlords gotta eat too
Banksters load the kids up with lifetime school debt. No surprise.
Everything is fractional reserve with the Federal Reserve. Even the gold it was entrusted to hold.
The Fed is one huge PhD Ponz scheme.
This is so NOT hard to fix. But the right policy does not begin by saddling the generation of home buyers with debilitating amounts of student debt. In my family neither the MD (31) nor the high school teacher (27) has bought a house. The market is so dysfunctional now they are afraid of getting whiplashed if they need to move for work. Also, our ridiculous "landed gentry" of university administrators and faculty is putting a stick in the wheel. Since most of the building in 2005-7 was in places nobody wants to live - like suburban Las Vegas (Indio?) there is plenty of room for construction jobs to expand the housing supply close-in. Every US recovery in the last century has been built upon household formation. I wonder if the WH economists have ever met a construction worker.
"But the right policy does not begin by saddling the generation of home buyers with debilitating amounts of student debt." Oh, I don't know about that. It's gotta be good for the bankers. It cannot be discharged in bankruptcy, and so will endure until the entire student body dies of old age or suicide, whichever comes first. In any case, it will be an "asset" in somebody's book for a long, l o n g, time.
Craig
I blame it on women. I've got more ex-wives than I do children. The CIA and the globalists attempted to control society and the women fell for it. Ok well Alcohol did lead meto become part of the Q99X2 so it wasn't all women but at least 3 of them as far as I'm concerned.
Two words: student loans.
Two more words: "sharing" economy.
Nuff said.
If the only reason to get a crappy job is so you can buy a house, why do it? Especially if living in the basement is free. The longer it goes on like this the more difficult it will be to reverse... the unintended consequences of both financial and social engineering. All those worthless houses depreciating at 2.5% per year, no one to pay interest, fix the roof or care for the yard. In my neighborhood a number of the homes that were snapped up by investors look like crap.
Actually we're the most sexually repressed people in world history. There are some crazy fucking parents who don't even want their daughters fucking at age 20. Back in my day (2000 years ago), we fucked from age 12 to death. In Romeo & Juliet, Juliet is 13 years old and she fucks Romeo on the second or third time they meet. That was why they got married - so they could fuck.
Pardee must have missed this memo...they're grading raw land and building $500K+ (3,000 SF+) houses here in Henderson, NV. Their 5 models are fully framed in less than a week.
Check out this Federal Reserve paper by Andrew D. Paciorek (2013)
http://www.federalreserve.gov/pubs/feds/2013/201326/201326pap.pdf
“…Indeed, household formation involves a complicated series of decisions including, for example, whether to move out of a parent’s home, whether to live alone or with roommates, and whether to get married to or form a partnership with another individual…”
“In addition, since some individuals report having very low, zero, or even
negative incomes despite being neither unemployed nor out of the labor force, I de?ne an additional
indicator variable for incomes of less than $1,000….”
---
Dear Ms Fed Chairwoman,
THE PEOPLE ARE BROKE.
Why don’t you work with that one as your premise? And cut the bullshit.
Don't worry sub primes will take of this. Debt burden college kids are good for your annual 30 year loan.
The combination of fewer jobs, more student debt, stagnant wages, and rising real living expenses tend to have a depressing impact on household formation.
Women bought into the globalist bs hook line and sinker.
Try finding a non brainwashed woman.
Many married Big Daddy Gubermint outright, the ultimate provider; Uncle Sam should be listed as father on half the current birth certificates.
Cold weather does impede household formation due to the significant shrinkage effect.
Hint: Think George Costanza
Given the lack of good paying jobs and the debt burden of college graduates, it seems very hard for a person to get a job and qualify for a reasonable mortgage or have the down payment. What, a 23 year old with 35K in college debt, and a 12 dollar an hour starting position with little prospect for advancement. How are they going to afford a home mortgage? The race to the bottom in wages and benefits leaves people less able to buy a house or car or consume vacations and goods. Yet, the same corporations and politicians who cheer the race to the bottom and record corporate profits, can't seem to understand that market economies and corporations need customers. You can't sell shit and make a profit for shareholders when you customers are living in poverty. Simple math and the basic laws of physics prove this to be true. I see small businesses start up and fall flat in 6 months, you ask the owner what happened and it is the same thing, too few customers with too little money.
The system that is designed for wealth skimming, i.e. the markets, and for wealth transfer, i.e. the Federal Reserve Policies, can not produce customers to be the source of ALL profit. Start a business, and see if you make money when most people are working for 8-12 dollars per hour. See how much demand comes from them for your products or services. A disaster is built into capitalism when the wealth gain from productivity does not go, in part, to workers. Winner take all is where we are at, and the winners are playing inside rules with all the political power to make the rules.
This system will crash. It is crashing.
Kids love to spend their 20's and 30's with their loving and providing parents these days!
Its so beatiful makes me wanna cry!
But but but you can use a houshold as ATM.
HELOC is baaaaack!!
http://online.wsj.com/articles/borrowers-tap-their-homes-at-a-hot-clip-1...