Thursday, August 23, 2012

2.6 Million Missing Households

Many things have gone missing thanks to the Great Recession: money that should have been spent; children who should have been born; households that should have been formed.

About those missing households--a Cleveland Fed study estimates their number at 2.6 million. That is, without the Great Recession, there would have been 2.6 million more households in the U.S. in 2011. Fully 1.9 million (or 73 percent) of the missing households would have been headed by adults under age 35. Instead of establishing their own households, many young adults are living with their parents because of unemployment and student loan debt.

When the under-35 age group finally does move out on its own, notes the Cleveland Fed study, they may be more likely to rent than to buy. This is not only because of the economy but also the psychology. According to Zillow research, nearly half--48 percent--of homeowners under age 40 with a mortgage are underwater. The young adults who have yet to move out of their parents' home may be thinking they are the lucky ones.

Source: Federal Reserve Bank of Cleveland, Household Formation and the Great Recession

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