Thursday, January 14, 2010

Long-term Household Formation Trends

April 15, 1987

The average number of people in an American household declined from 2.69 in 1985, 2.76 in 1980 and 3.14 in 1970, the bureau said. The number increased slightly in 1983, apparently because households stayed together for economic reasons after the recession of 1981 and 1982.


The decline nationally in household size is not a new phenomenon. Although it has drawn attention in the last decade, it is part of a trend that dates at least to the last century. The average number of people per household was 5.55 in 1850, 5.04 in 1880, 4.76 in 1900 and 4.54 in 1910. It declined to 4.34 in 1920, 4.11 in 1930, 3.67 in 1940, 3.37 in 1950 and 3.33 in 1960.

The Census Bureau projects that the average will continue declining, to 2.48 in the year 2000, from the current 2.67.

U.S. Census Bureau: State & County QuickFacts

Persons per household, 2000: 2.59

Note that the long-term trend is no longer declining at a rapid pace. The Census Bureau's 1987 target for the year 2000 was not reached.

There's a risk that the long-term trend is forming a bottom. There's an additional risk that it won't just bottom, but that it will actually begin to reverse. The stock market's been stagnant for a decade. Unemployment is now extremely high.

The population will most likely continue to grow, but if more and more people live together in the same household ("for economic reasons" as seen above) then that's just one more headwind for the housing market.

One could argue that the household size might continue to shrink if people stopped having children for economic reasons though. Of course, in that case our population wouldn't grow. That would really hurt the ponzi scheme nature of our economy. How could we continue to borrow prosperity from our children and grandchildren if we don't produce any?

December 22, 2005

Japan population starts to shrink

Japan's population is set to drop this year for the first time since records began more than a century ago, according to a government report.


Japanese women have cited inadequate child care, low part-time wages and long hours worked by their husbands as some of the reasons why they do not have any children, or only have one.

August 6, 2009
Birth Rate Is Said to Fall as a Result of Recession

Historically, birth rates have fluctuated with the economy. Record lows were recorded during two economic crises: the Depression in the 1930s and the Arab oil embargo in the 1970s.

I've often argued here that we are trying to combine the very best of The Great Depression with the very best of the 1970s. Sigh.

In summary, there is a risk of household formation growing due to economic reasons and population growth slowing due to economic reasons. Neither effect would help solve our national housing glut.


Stagflationary Mark said...

I said...

"In summary, there is a risk of household formation growing..."

I meant to say...

"In summary, there is a risk of household size growing..."


mab said...


I'm actually quite optimistic on household formation. Of course, I'm including squatters in my forecast! In all seriousness, if you're going to be a bando, you might as well have your own place.

In England during the 1970s, they instituted "squatters rights". The English courts had a goofy ruling whereby you couldn't remove squatters if they had been squatting for a certain period of time. No joke. I wonder if they called the court's ruling the Dread Squat Decision? ;)

Here's some more good news. Personal Current Transfers (income received from Uncle Sam) as
a percentage of Wages and Salaries:

1999: 23%
Q3 2009: 34%

And here's some even better news. Personal Current Transfers as a percentage of PRIVATE Wages and Salaries:

1999: 27%
Q3 2009: 42%.

Forty two percent!?!? Good grief, that's almost 1 out of every 2 dollars. Talk about crowding out. Oh well, the nice thing is that as long as the printing press keeps working, the upper bound is theoretically limitless.

Ain't no bakery.

EconomicDisconnect said...

Countries like Russia, the former eastern bloc countries, and Japan are facing terrible demographic pressures. Relying on immigration to fill the gap ends in tears, though Russia and Japan have little immigration anyways.

Stagflationary Mark said...


Good grief is right.

"And here's some even better news."

A friend of mine has an ongoing joke concerning "great news" by the way. His boss used that phrase on him.

So what's the joke? Believe it or not, the news was actually quite bad.

Lipstick and pig make one heck of a good looking pony though. Let's start the show!

Stagflationary Mark said...


Terrible demographics? The glass is 1/3rd full! Cheer up!

From the song "High Hopes"...

Once there was a silly old ram
Thought he'd punch a hole in a dam
No one could make that ram scram
He kept buttin' that dam

THAT didn't cheer you up? Why not?

You are picturing the consequences of a breaking dam? All that pain? All that misery? Wow. Some people just always see the darker side. ;)

Stagflationary Mark said...

Today's trivia.

Re: why would people buy treasuries

Will be a very long, long time, if ever, you'll see a repeat of TLT go to 120+.

That was a once in a lifetime event crises in late 2008.

It's enough to make me want to buy TLT and become a true deflationist.

I hope he's right. Unfortunately, he's got a bit of a Freudian slip in his rebuttal. "Crises" is plural. "Crisis" is singular.

G.H. said...


"I wonder if they called the court's ruling the Dread Squat Decision?"

LM you know what O!

In my view, the AS of USH's is going to continue to shrink as long as we have solvent pensions and SSA. In the last decade the growth of two-person retiree single family homes has ballooned. And stable pension and SSA payments are truly the only thing that has kept broad consumer activity alive as far as I'm concerned. As long as these folks continue to have "free money" flowing into their accounts each month (and stay alive) they will continue to spend with little concern for the value of money. I lived in Florida for 8 years and retiree couples think absolutely nothing of dropping $250K+ for a 2Ksqft home, showroom furnishing it, and eating out every night. They ain't slowin' down now either.

Until this demographic changes, and anyone who's paying attention like us knows it will, I don't forsee that 2.59 number growing. And unless we see wholesale pension promises going belly up it's always going to be a healthy market in The Villages.

Now I'm not suggesting that retiree's can carry the load for the US consumer, only that they will have a downward effect on that 2.59 number for a while yet so long as pensions stay alive.

My opinion of course based on firsthand experience in retiree ground zero.

EconomicDisconnect said...

are you retired because you stopped working at an older age or retired like Mark because he invented Halo3?

Stagflationary Mark said...


And unless we see wholesale pension promises going belly up it's always going to be a healthy market in The Villages.

The Village (The Prisoner)

The Village is a self-contained society, and appears to be mostly self-sufficient as well, although no farming areas are ever seen, so it appears that food and supplies are shipped in from outside.

I think you are onto something here. ;)

Stagflationary Mark said...

Just spotted this one from December...

China Property Bubble May Lead to U.S.-Style Real Estate Slump

In Beijing’s Chaoyang district, which represents a third of all residential property deals in the capital, homes now sell for an average of almost $300 per square foot. That means a typical 1,000-square-foot apartment costs about 80 times the average annual income of the city’s residents.

In other words, if you live a VERY long life, you start working when you are 5, work to the age of 85, spend ALL of your money solely on purchasing your 1,000-square-foot apartment, the property somehow requires no insurance or maintenance, you somehow require no food or clothing, AND you aren't charged any interest (over inflation) on the loan then you should be able to pay it off just as you put a foot in the grave.

If that isn't an illusion of property (prosperity) I don't know what is.

EconomicDisconnect said...

I think how backwards our system is.

When you are young they tell you to accumulate debt to get a "better life" but when you are old to save for, well, no reason really.

My plan,
stay way ahead until about 40; blow the whole savings until 50; take out a monster reverse mortgage and live the life until I die at which point the debt defaults.

See, it is all backwards!

Stagflationary Mark said...


If you really want to stick it to "them" then make sure your house is fully paid off at age 75. Then take out a reverse mortgage so that the bank pays you to live in the house until you pass away. Based on how little life span you seem to have left, you should get a pretty nice payment.

Meanwhile, secretly research a new drug that will allow you to live forever.

Just know that things may change 100 years from now, especially if the bank is STILL making payments to you.

Ethically challenged banks may even consider "hit men" to be a form of risk management in the distant future.

As a side note, what are the odds of ethically challenged banks existing 100 years from now though? Maybe you shouldn't answer that.

Ethics, Banking, and the Rest of Corporate America

In recent decades, as illustrated by several recent spectacular failures, winning has taken on a different meaning. Winning seems to now mean getting rich very fast no matter what it does to whom. Getting rich, even at the expense of stockholders or employees is more important than honesty and doing business according to a code of ethics.

Financial institutions are the exception to this. Financial institutions are closely watched. They are subject to an array of regulations and performance requirements that include standards of behavior of those who run the institutions.

Hahaha! Either someone has a great sense of humor OR this article was written before the greed based financial crisis unfolded. You make the call! (Hint: Think 2002.)

G.H. said...

GYSC, I'm not retired, just well-versed in Florida's latest RE boom/bust. I'm currently, and always have been, of the mindset to save more, spend less, work longer.


The Villages is really an interesting story and not at all self-contained, LOL.

You see, they have these things call "Development Districts" and they issue bonds to investors to raise funds so they can purchase real estate back from the developer. Stuff like community centers, cart paths, entrance ways, ball fields and such. And these bonds are tax exempt.

In 2005 (yes 2005) they issued a $300M bond to buy all manner of CRE and such from the developer. Needless to say, by now this transaction was made at grossly overvalued prices and the purchases are way, way, way underwater. But that's not the problem for the residents at this time.

The problem is the IRS is investigating this $300M issue (and others) and there is some chance that it/they will be determined not to be valid tax-exempt.

The Villages isn't the only development to have issued these questionable bonds, and the fact that there are so many others may be their saving grace because the fallout may be so great as to require (require?) government intervention of some kind (i.e. change the rules to protect the contributors.)

I've been saying for two years now that The Villages is going to go belly up and with it Citizens Bank which is considered by many to be the "bank of The Villages."

I'm careful about who I say this to though, because when I say such things I get responses ranging from "did you just get off a spaceship from Mars" to "that will never happen".

I don't mind though, I just say let's compare our track records through the lastest crisis/bear market.

G.H. said...

A little OT but some important reading for the evening, please see:

WE THE PEOPLE (Have Had Enough)

EconomicDisconnect said...

the secret to ever life is telomeres. We are close. What then?

Stagflationary Mark said...


From your link...

"Government agencies were aware of and sounded the alarm as early as 2004."

They must have been getting the same ridiculous mortgage offers that I was getting in MY mailbox. Go figure.


"We are close. What then?"

The answer is obvious. More robots! Robots can solve all "core" problems (i.e., ex unemployment and deficit problems).

EconomicDisconnect said...


45-14, wowza.

I said the next bubble is in robots and everyone laughed at me;
"They're all gonna laugh at you"
-the film "Carrie"

G.H. said...


"They must have been getting the same ridiculous mortgage offers that I was getting in MY mailbox. Go figure."

And they were getting more than that, here's a favorite bookmarked link of mine from 2003:

Fed Tax Break Encourages SUV Purchases

"Congress recently passed a tax bill, as proposed in President Bush's economic stimulus plan, that offers a $100,000 tax credit for business owners who purchase any vehicle weighing 6,000 pounds or more when fully loaded."

This is proof positive of the unabashed hypocrisy that is now rampant among those Republican "tea party"er's who are screaming bloody murder regarding Obama's unfettered spending spree (and Villagers are staunch tea party er's.)

Of course they are right to oppose this spending spree based on "stimulus" propaganda. But where's the comparison's to such foolish programs as outlined in above link leading to false senses of expanding business cycle security and illusory wealth in previous admin?

mab said...


They must have been getting the same ridiculous mortgage offers that I was getting in MY mailbox. Go figure.

The Fed knew what was going on, they just chose to ignore the fraud. The idiotic notion of "financial innovation" was a ruse that the Fed used as justification for looking the other way while the biggest swindle in history was taking place. Greenspan and Bernanke are weak. They were put in charge by the bankers because of their weakness.

The savings glut CONcept bugs me to no end. Bernanke and GreenSHAM CONveniently have the cause and effect all wrong.

U.S. Banks created trillions in credit and handed it out to Americans that had NO shot of ever paying the money back. Thanks to our trade deficits, the newly created money ended up in China and the OPEC states which turned around and bought Treasuries. The demand for Treasuries lowered interest rates and reinforced and perpetuated the cycle. How is THAT a savings glut? It's a credit creation GLUT!


mab said...


Do our markets reflect the fundamentals? Do we have free marklet interest rates that send proper signals? Do we have suitable checks against senseless credit issuance? Hell no! The largest market of all (residential mortgages) is a basket case as are all the rest of our markets.

The Fed is an utter failure. Meddling fools. They've enriched their handlers and impoverished the American middle class.

High crimes imo. And that's NOT gallows humor.

Stagflationary Mark said...


The bubble in robots won't pop. We'll just get more and more of them until they pop us, lol.


From your link.

"It sounded too good to be true," said Wizinsky, a health care consultant in Novi, Mich. "But it was true. So I bought the SUV. For a small company like mine it's a significant credit."

Unfortunately, it wasn't too good to be true. It was simply borrowing from all of us to pay some of us. Sigh.


Do our markets reflect the fundamentals?

Yes and no?

I'm a believer in "The Relative Market Efficiency" hypothesis.

The markets are to 100% efficiency as government is to 100% efficiency.

Malinvestments for the win!

G.H. said...


"I'm a believer in "The Relative Market Efficiency" hypothesis."

Relative Market Efficiency

"Market tip: when building a new market to increase trading distance and therefore increase gold intake, don't forget to delete your old market.

Be sure new market is fully built before deleting old
. I once eagerly deleted my old market when new was 97% complete. All my trade carts stopped dead in their tracks."

This is the new normal. Downsizing. Delete McMansions and attached jumbo loans once all 800sqft apartments are completed in China.

We're all moving to China. Jim Rogers is a genius.

Stagflationary Mark said...


Both funny and tragic!

Our economy is based on a computer game. Who knew?