Don't Be Distracted by the Recent Swings in Household Formation Estimates

Household formation is essential to the growth of U.S. housing markets – it generates demand for about three out of four new housing units. When the Census Bureau's fourth quarter 2014 Housing Vacancy Survey (HVS) reported that annual household formation jumped to nearly 2 million, analysts became hopeful that this fundamental market driver had finally broken out of its post-crisis doldrums. Unfortunately, that optimism has been short-lived. The last two quarterly estimates from the HVS have shown household growth plummeting to only about half a million per year – a level not far above the worst readings from the Great Recession.

In a new edition of Housing Insights, Fannie Mae's Economic & Strategic Research Group explores the factors underlying the recent volatility in HVS household growth estimates, and develops an alternative household growth series that is based on a smoothed trend in housing unit occupancy rates and a new set of housing stock estimates.

Read our latest edition of Housing Insights and hear from the author, Patrick Simmons, in his related FM Commentary.

Don't Be Distracted by the Recent Swings in Household Formation Estimates (PDF)