Possible Effects of Household Formation Shifts on Rent and Price Growth in 2023

An early look at the 2022 Current Population Survey Annual Social and Economic Supplement (CPS/ASEC) Household Data, which attempts to estimate the number of and characteristics of households and families, suggests households grew by almost 2 million from March 2021 to March 2022—despite only modest growth in the adult population—with especially rapid growth in the number of young adult households.

Based on these results, housing economist Tom Lawler points out that household growth doesn’t seem to be getting the boost from behavioral changes it was a year ago. If CPS/ASEC estimates do, in fact, accurately reflect household changes, then the almost 2 million increase was largely driven by the surge in adults living alone (that is, behavioral rather than population changes by age group).

“If that turns out to be true,” Lawler says, “then household growth is or will return back to growth more consistent with underlying population changes by age group, a development that would imply household growth over the next year of about half that apparently experienced from early 2021 to early 2022″—a shift that would have major implications for rent growth and home price growth projections in 2023.

According to the CPS/ASEC results, from March 2021 to March 2022 the number of young adults living at home fell sharply, while the number of young adults who “headed” households increased significantly, with much of that increase coming from young adults living alone. …

According to CPS/ASEC estimates, the % of adults (18+) living alone jumped to 14.9% in March 2022 from 14.4% in March 2021, and the % of households with just one member climbed to 28.9% from 28.2%.  Both “living alone” measures (share of population and share of households) were at the highest levels ever recorded by the CPS/ASEC.  The jump in one-person households was the major reason why the average household size as measured by the CPS/ASEC plunged to 2.50 in March 2022 (the lowest ever recorded) from 2.54 in March 2021. (Unrounded the average household size fell by .0341).   In terms of share of total households, the one-person share increased the most for young adults (up to 39 years) and for 65-74 year olds.

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