According to ycharts.com, on average about one million new households are created each year, but since the recession that has dropped to 500,000, spurring trulia.com to say there are “2.4 million” missing households. In his 2011 Berkshire Hathaway shareholders letter, Warren Buffett says, “People may postpone hitching up during uncertain times, but eventually hormones take over. And while ‘doubling-up’ may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.” While he has made many correct statements, earning billions in the process, this may not be one of them: The number of young adults living with their parents is rising—51 percent of 18-23 year-olds, and 14 percent of those 14-34 years old, live with their parents and have learned cohabitation skills.
Buffett might be concerned because of his investments in housing-related businesses, including Clayton Homes, the largest producer of manufactured homes in North America. While Clayton’s revenue is up 84 percent for the first nine months of this fiscal year, it’s because of increased interest income and lower loan loss provisions—home sales are up only nine percent. While Buffett and others are correct in saying there is pent-up demand for household formation, marriage rates are at their lowest in over 100 years, and the average age of a first marriage is at a century-plus high. Many people are renting and sharing instead of buying, as dailyfinance.com informs MHProNews.com. While the recession may be over, as unemployment has fallen and the stock markets keep going higher, a recession can hurt wages for years afterward. A study by Yale University reports wage losses for those who graduate during a recession range from one percent to 13 percent per year, which adds up to $80,000 over 20 years. With real income stagnant, those children may be living in mom and dad’s basement for several more years. ##
(Image credit: Fotosearch.com–homeownership fading)