Homeownership Declines, but Increased Household Formation Bodes Well for the Future

One negative impact from the Great Recession has been the reduction in homeownership to levels not seen since the 1980’s (see chart below). The reasons are many, including foreclosures, fear of ownership and large levels of personal debt. More recently, however, the main reason for the homeownership rate drop bodes well for the future – increased household formation. Reversing the trend of younger people moving back home after college because of high student debt and limited employment opportunities, young people appear to be moving out on their own again. As reported in the Commerce Department’s report on the homeownership rate, household formation increased by 1.66 million from a year earlier. While this won’t immediately jump start the housing market, it is a positive leading indicator and a reversal of a trend that has plagued the all-important housing sector since 2008.