Tuesday, August 30, 2011

Changing living patterns in America: an update

Earlier this summer (side note: how is it almost September, what happened to my summer?), I ran a post discussing the rise in homes with dual master bedrooms in the U.S. The CNN article that inspired the post talked about dual masters being a solution to "mediocre marriages", but I took the rise to be indicative of a broader change in American living habits. I wrote then:
For one, the housing crash that precipitated the financial crisis of 2007-2008 has eroded a long-standing belief that housing is a stable investment and that home ownership is a laudable goal for all Americans. An increasing number of younger people (including well-regarded journalist and hedge fund manager James Altucher) have begun to question the wisdom of owning real estate at all, and have turned to renting instead. A dual master setup would seem to lend itself particularly well to a renting situation, where two people could share the rent on a house without having to share a bathroom or a primary living space.
Furthermore, economic realities affecting two important groups of people may force a trend toward co-habitation over the coming years. The first of these groups is the elderly--while they likely don't have to worry about suspensions of Social Security payments any time soon, it is clear that the Federal Reserve's low-interest rate policy has made life very difficult for "savers", those who rely on interest payments to generate income. Many of the elderly are of course in this category, and without a steady stream of income, they may be forced to move in with their children, as was commonplace in previous generations.

The second such group is on the other end of the spectrum, but no less impacted by the economic recession. With an ever-increasing number of college graduates unable to find adequate employment upon graduation--and many others accepting much lower-paying jobs out of necessity--young professionals may be forced to move back in with their parents on a semi-permanent basis as they try to whittle away at their mountains of student loan debt. This dynamic has of course already begun, and homebuilders may just be trying to get ahead of the curve.
Now, this article from Bloomberg seems to agree with me, and provides some statistics to lend my argument some weight--always a good thing.
The U.S. is experiencing a surge in the multigenerational households that were once a common feature of American life, and Hispanic and Asian families are driving the trend, according to U.S. Census Bureau data released this month. The number of such households, defined as those with three or more generations living under one roof, grew to almost 5.1 million in 2010, a 30 percent increase from 3.9 million in 2000, the data show.
They hit 2.9 million in 1950 and didn’t top that again until four decades later, according to the Washington-based Pew Research Center. At the 1980 low, multiple-generation homes represented just 2.9 percent of all U.S. households, down from 7.8 percent in 1900.
Although the term multigenerational invokes images of grandma churning butter on a pioneer farm or turn-of-the-century immigrants crammed into tenements, today’s extended families are more likely to live in suburbs. Among large cities, the one with the highest percentage of multigenerational households, at 16 percent, is Norwalk, California, a collection of largely single- family homes 15 miles (25 kilometers) south of Los Angeles.
“Many conservatives are locked into this 1950s paradigm of the nuclear family,” said Joel Kotkin, author of “The Next Hundred Million: America in 2050,” a book about demographics. “Boomers are aging in place. Immigrants move in with their cousins. The suburbs are changing.”
Job losses and the difficulty of purchasing a home make young people more likely to live with their parents, according to D’Vera Cohn, a senior writer with Pew who has studied the trend. Longer life spans and growth in the Hispanic and Asian populations keep older folks in the house.
So, in addition to the economic reasons I listed in my original post, you can now add a demographic argument to the list. If we continue to see the Mexican immigration and homebuying that we've seen in recent months, this shift could become even more pronounced.

Either way, the trend toward cohabitation and homes with dual master bedrooms is bad news for the overall housing market, especially new construction. But then, that's a market that's just about dead anyway, whether or not we'd like to admit it.


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