Just about a year ago we questioned the "demographic demand" thesis [7] for why the US housing 'recovery' would become self-sustaining and lead to yet another fiscal and monetary 'nirvana'. However, while the 'household formation' meme remains front-and-center among bloviating Fed apologists; the sad facts are that not only is household formation actually still falling but, as a recent Pew Research study finds [8], a record 21 million young adults are now living at home with their parents.
Since 2007, young adults have grown increasingly likely to live at home. This is a new trend with a stunning 45-year high 36% (21 million) of 18-31 year-olds back with mom-and-pop. By way of corollary, with one-third of all Italian adults living at home (and 61% of young-adults), it would seem arguing that a housing renaissance in the US is around the corner on the basis of demographics is risible at best.
Household formation is falling among the young adults (a new trend)...
[9]
as 18-31 year olds continue to be forced to move back in with their parents...
[10]
But as we warned 10 months ago, there is massively more room for this to increase...
In Italy a third of young adults live with their parents. In the US "only" 22%. The "demographic demand" argument for housing is very weak
— zerohedge (@zerohedge) October 19, 2012 [11]
as we see in Italy [12], it can get considerably worse...
According to a report published on Wednesday, almost a third of Italian adults (31%) live with their parents.
The highest proportion was among 18- to 29-year-olds, for whom unemployment is particularly high, with 60.7% reported living at home.
So with mortgage rates up, household formation down, and the rotation from full-time to part-time jobs, we suspect the exuberance priced into a 'housing recovery'-based growth renaissance is as unlikely as Ron Paul becoming the next Fed Head.