Given that household formation is such a critical driver of the housing market it is worth revisiting the subject by looking at some additional data. Here is what we've discussed so far:
1. Household formation is really driven by family formation (note that the two are not necessarily the same)
2. Michael Shermer had proposed that the decline in marriage is at the root of slower family formation.
3. But we also know that record numbers of young people currently live with their parents. That would suggest that we have a delay in first marriage (possibly caused by the economy but could also involve other factors), rather than a more permanent marriage decline.
There is another factor that supports the theory that the overall decline in marriage is caused by this delay. That factor is the falling divorce rate in the US, suggesting that divorces are not contributing to the overall marriage decline. The census data doesn't yet contain the 2010 and 2011 divorce rates, but the trend definitely shows a gradual reduction.
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| US divorce rate (Source: The US Census Bureau) |
The most striking evidence for the "marriage delay theory" however is simply the rapid increase in the median age of first marriage. The median age is now the highest on record (since 1890).
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| Median age at first marriage (Source: The US Census Bureau) |
Family formation has therefore been slowed by people getting married later in life. If the median age rate of increase is maintained, it is clearly bad news for family formation going forward. But it is difficult to see how such growth is sustainable. At the current rate, by the year 2025 the median age for a man getting married for the first time will be around 36 and for a woman it would be 32. These ages may be common among certain groups in metropolitan areas, but as a national median such late marriages are highly unlikely - even in 2025. We should therefore start seeing a slowdown in this trend in the near future.
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