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US Household Shifts Could Impact Housing Recovery

Friday, 8 Jul 2011 | 2:33 PM ET

Every now and then you need to take a step back and put the housing market into perspective, take a break from all the monthly motions and commotions, stress and distress.

AP

Today I read a report that did just that. It takes a big-picture snapshot of how housing has fundamentally changed over the past several decades, which could have a big impact on its future as the industry rebuilds itself, literally and economically.

The report, from John Burns Real Estate Consulting's Chris Porter, is titled simply, "Tremendous Demographic Shift." And the numbers are pretty tremendous.

"The number of non-family households—people living alone or households that do not have any members related to the householder—has increased nearly five times in the last 50 years, from 7.9 million to 39.2 million. At the same time, the number of family households has increased by just 1.7 times, from 45.1 million to 77.5 million," according to Porter.

In addition, married couples have dropped to less than half of all US households from 75 percent in 1960.

So let's think about the current housing stock, much of which is more than 50 years old. We've recently seen a downsizing trend for several reasons, namely the weak economy and builders constructing cheaper homes to meet the demand but also the environmental movement and the high cost of energy.

But this comes right after the "McMansion" era when oversized homes were all the rage. Those homes, of course, still exist in vast quantities, despite the fact that there are, according to this report, fewer big family households and therefore less need for large square footage.

We've also talked a lot about the surge in renting; we've blamed it on the housing crash, fear of buying into a depreciating market and the tight credit conditions that are pricing many potential buyers out.

Perhaps there's more to it than that as well. Perhaps with fewer large family households and less desire for a big space, smaller, full-service rental apartments are more desirable to a growing segment of the population.

"Family households are more likely to stretch for size over location. Non-family households are more likely to value location—proximity to work, entertainment, etc.—and then size. They are less willing to commute than a family household," noted Porter.

We also have to look at the growing population of Americans who intend to "age in place," that is, the baby boomers who are moving out of the big family homes but not into what we used to call "retirement homes."

Now they're "active adult communities," with smaller one-story homes. That demographic, though, plays against a growing demographic of Hispanic Americans. The average Hispanic household is statistically larger than the national average.

So what should home builders and housing watchers take from all this? Obviously there are and always will be large families in the suburbs who want to live in big houses. There will always be wealthy Americans who desire to live in spaces that far exceed their needs. But the shift in household size cannot simply be considered anecdotal.

When you couple that shift with a much-changed mortgage market, one that prices so many more Americans out of larger, move-up homes, you have to be concerned about what happens to the stock of larger homes, old and new. Do we see huge price reductions as demand falters?

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick

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