Tuesday, February 19, 2013

US household formation has stabilized

According to the US Census Bureau, about 3.5 million households have been created over the past couple of years. As a comparison, only 755K were created in the previous two years (08-10) - with the recession hampering household formation. The following chart shows the ratio of the number of households (using the revised household number for 2011) to the US population over time. The ratio has stabilized, which is one of the reasons that demand for housing has improved recently.

Source: US Census Bureau

With pent up demand diminishing after 2013 however, housing price appreciation should revert back to the growth in household incomes (as discussed here). That means that going forward price increases on average should moderate.

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