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Wed June 18, 2014
Sluggish Housing Market A Product Of Millions Of 'Missing Households'
Originally published on Wed June 18, 2014 6:08 pm
A year ago, the housing market looked like it was finally recovering. Sales and prices were picking up. But then home sales fizzled. Currently, they are down about 7 percent from last spring.
A big part of why housing remains so stunted is that there are more than 2 million "missing households" in the U.S. That's how economists describe the fact that fewer people are striking out on their own to find places to live.
Instead of renting an apartment or buying a home, a large number of Americans in their 20s and early 30s are living with family or tripling up with roommates. That's because younger Americans are having an especially tough time since the recession.
"We would love to buy a house right now, but we just don't have anything saved currently," says 26-year-old Marissa Szabo.
Szabo works in Boston at the Office of the State Auditor. At lunch, she sits outside Massachusetts' grand State House, with its big golden dome. But in the evening, she crams into an apartment she's renting with several roommates who are also in their 20s.
"At the most, I've had five [roommates]. I currently have three," Szabo says. "I've never been able to consider getting a place by myself just because of how high the rent is."
The high cost of renting is one of the things that have made life tougher for Szabo and other millennials.
Szabo is ready to settle down and move in with her boyfriend. He is 28 years old and they are talking about getting married and having kids. They feel like they are done with the roommate stage of life.
"We're starting our lives together," Szabo says. "We wanted it to be together and not together plus eight or three or however many."
But high rents, combined with student debt and stagnant wages, have made it very tough for young people to save money for a down payment to buy a house.
Szabo and her boyfriend tried to find an apartment to rent by themselves but "the conditions of apartments weren't great," she says.
Plus, it was prohibitively expensive: "Some places were asking for first [and] last [month's rent], security [deposit], a broker's fee for our Realtor and a broker's fee for the landlord who hired one too. So that's five months' rent right upfront," Szabo says. "That was the straw that broke the camel's back. And we both just sat down and said, 'All right, are we willing to take all our money and light it on fire?' "
So, like other millennials, they turned to their friends and family. Szabo and her boyfriend have decided to move in with her mother, who has an extra bedroom. That will let them save up for a down payment to buy a house in a year or two.
"My mom has been so awesome and supportive about it," Szabo says. "She doesn't want rent or anything like that. We'll help with utilities and we'll do some repairs around the house for her."
In the past few years, economists have said millennials who live with parents or roommates represent pent-up demand. They argue that soon these young people will move out and become first-time homebuyers. This, in turn, creates more jobs and helps the whole economy.
The only problem with this scenario: It hasn't actually happened yet.
"The first-time homebuyer is really absent from the market," says David Crowe, the chief economist for the National Association of Home Builders.
He says only 16 percent of new-home sales are to first-time homebuyers. That is half of normal. And in terms of the numbers of new homes getting built, "We're not even halfway back," Crowe says.
The country hasn't been building this few homes since World War II. And new numbers out this week from the Commerce Department show that construction of new single-family homes fell about 6 percent in May compared with the month before. Mortgage applications were down this week too.
Still, Crowe predicts the market will keep recovering. He says it will just be a very slow process.
MELISSA BLOCK, HOST:
There are more than two million missing households in the U.S. That's how economists describe the fact that fewer people are striking out on their own to find places to live. A surprising number of Americans in their twenties and early thirties are still living with family or with several roommates. And the latest numbers out this week, show that's continuing to hurt the recovery in the housing market. NPR's Chris Arnold has more.
CHRIS ARNOLD, BYLINE: A year ago, the housing market was looking like it was finally recovering. Sales and prices were picking up. But then, home sales fizzled. They're now down about 7 percent from last spring, and a big reason for that is that younger Americans are having an especially tough time since this recession.
MARISSA SZABO: We would love to buy a house right now, but we just don't have anything saved up currently.
ARNOLD: Marissa is 26-years-old. She works in the state auditor's office in Boston, and on her lunch break she's come outside the statehouse, here, with its big golden dome of a roof. Schoolkids on a field trip stream out of the building.
UNIDENTIFIED WOMAN: Stay together.
ARNOLD: The kids happily head back to get packed into a crowded school bus, and Marissa Szabo doesn't have much more space than that in the apartment she's renting in Boston. Like many twenty-somethings, she's living with a lot of roommates.
SZABO: The most I've had - five. I currently have three. And, yeah, I've never even been able to consider getting a place by myself, just because of how high the rent is.
ARNOLD: The high cost renting is one of the things that's made life tougher for Szabo and other millennial's. And now she's ready to settle down and move in with her boyfriend. He's 28. They're talking about getting married, having kids, and they're kind of done with the roommate thing.
SZABO: We're starting our lives together. We wanted it to be together, not together plus eight or three or however many.
ARNOLD: But those high rents combined with student debt and stagnant wages mean, for young people right now, it is just very tough to save money for a down payment to buy a house. And Marissa Szabo and her boyfriend were getting frustrated as they looked for an apartment, even just to rent by themselves.
SZABO: Some places were asking for first, last, security and then a broker's fee, too. So that's five months rent, right upfront. And we both just sat down and said, all right, are we willing to take all of our money and light it on fire?
ARNOLD: So when you're in your twenties and you have no place else to turn, what do you do? Szabo and her boyfriend have decided to move in with her mother who, it turns out, has an extra bedroom. So that way they can save up a down payment and buy a house in a year or two.
SZABO: And my mom has been so awesome and supportive about it. She doesn't want rent or anything like that. We'll help with the utilities, and we'll do some repairs around the house for her, and she'll be happy, she says. So I think it's just a win-win situation for us.
ARNOLD: That's cool, yeah, I think a lot of parents - you know, as long as you don't stay too long.
SZABO: Exactly, exactly - right now she's like, yeah you're back. I'm like, for a little while, mom (Laughing).
ARNOLD: For a few years, now, economists have looked at all these millennials living with parents or roommates, and they've said, that has to be pent-up demand. And soon, as young people finally move out on their own, that'll mean more first-time homebuyers. It'll create more job. It'll help the whole economy. The only problem with that scenario is that it's still not actually happening yet.
DAVID CROWE: That's right. The first time homebuyer is really absent from the market.
ARNOLD: David Crowe is the chief economist for the National Association of Homebuilders. He says only 16 percent of new home sales are going to first-time homebuyers. That's half of normal. And in terms of the numbers of new homes that are actually getting built...
CROWE: We're not even halfway back.
ARNOLD: It's actually remarkable just how stunted home construction still is. The country hasn't been building this few homes since World War II, and things aren't getting much better. New numbers out this week from the Commerce Department show that construction of new single-family homes fell about 6 percent in May, compared to the month before. Mortgage applications were down this week, too. Still, Crowe expects that the market will keep recovering - just very slowly. Chris Arnold, NPR News, Boston.
ROBERT SIEGEL, HOST:
This is ALL THINGS CONSIDERED from NPR News. Transcript provided by NPR, Copyright NPR.