Eye On Housing
For the first time in decades, headship rates of young adults ages 25-34 increased in 2018. This was a hopeful indicator that the troublesome trend of rising shares of young adults living with parents, relatives or sharing house with roommates finally reversed. Whether the trend reversal can be sustained through and post the coronavirus outbreak depends on the duration and magnitude of job and income losses faced by young adults.
The headship rates – share of people who are household heads – tell us how many households are formed for a given population. The higher the headship rates, the more households are formed, the more housing units are needed to be built.
For decades, the US headship rates of young adults have been declining, suggesting the US housing market has been missing millions of new young adult households. Close to 46% of adults ages 25 to 34 were household heads in 1990 and 2000. Since that time, the headship rates for this age group have been declining relentlessly and hit the bottom reading of 40.2% in 2017.
2018 became the first year since the American Community Survey (ACS) stated generating these statistics to record rising headship rates among young adults. This is undoubtedly a welcome development that the housing market has been waiting for decades. While it is likely the rising trend would remain in the 2019 data, it remains to be seen if rising headship rates can be sustained through and post the coronavirus outbreak.
The 2018 uptick in headship rates is largely due to the declining share of young adults living with relatives (0.2 percentage point decline) and sharing housing with roommates, housemates and other nonrelatives (another 0.2 percentage point decline). Nevertheless, the current share of young adults living with relatives other than parents and sharing housing with non-relatives remained elevated, 5% and 7%, respectively.
The share of young adults living with parents remained at its historically high levels (21.5%) and showed no changes. As a result, more than a third of young adults ages 25-34 (this adds up to more than 15 million) lived with parents, relatives or sharing housing with nonrelatives in 2018.
In sharp contrast, less than 12% of 25-34 year olds lived with parents and only 5% percent shared housing in 2000. In addition, the portion of young adults who chose to live with relatives other than parents was 3% in 1990 vs current 5%.
Over the same years, the share of married partners co-leading independent households dropped from over 29% in 1990 to 17.4% in 2018. The rising numbers and shares of unmarried partners (from 3% in 1990 to 6% in 2018) were not enough to compensate for the steeper decline in married partnerships.
It has been suggested that the young adults merely postpone the decision to lead their own households, and what was the typical household-forming behavior in your late 20s a decade or two ago now happens in your late 30s. As of 2018, there is little evidence to support this hypothesis, as the household formation rates for the 35-44 year old group remained historically low. In fact, the decrease in headship rates is a universal phenomenon with all age groups registering declines since 2000.
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