According to Philly.com and the Census Bureau, U.S. household formations are at their lowest since 1947. Many feel this is helping to keep the supply of unsold homes at near-record levels nationwide, even thought relatively few homes are being added to the inventory.
Between March 2009 and March 2010, the number of households rose just 357,000 per the census data. in the previous 12 months, the number increased only 398,000, the third smallest increase on record since World War II. Between 2002 and 2007, before the economy turned, household formations averaged 1.3 million a year.
Lucien Salvant, a spokesman for the National Association of Realtors, believes it is a consequence of consumer fear of what’s happening with the economy and the job market. “When people are afraid of losing their jobs or not being able to get into the job market, they are not thinking about buying a home,” Salvant said. “Many opt to stay home with parents, or to share rentals with friends.”
The sharp drop in housing formation combined is clearly one of the main reasons that there is a large glut of inventory. It is clear that the job market and state of the economy are the fundamental causes of the formation drop. Savvy home buyers are recognizing these market conditions and taking advantage. The same can be said for people looking to upgrade their current residence.