Concerns are being raised that slowing household formations and workforce expansion could be a drag on homebuilding in the years to come.
A surge in household formation in 2011 and 2012 was an “early source of demand for single-family housing,” according to researchers at Auction.com. Since then, household formation has slowed and it is “dangerously close to the post-recession low” seen in 2010.
The researchers are concerned households in 2013 will be weaker than in 2012.
“The outlook for 2014 and beyond is predicated on the economic recovery boosting housing formations from their recent subdued pace. If that does not occur, housing demand will be weaker than current consensus estimates,” according to the Auction.com Quarterly Single-Family Update.
Meanwhile, Fannie Mae’s economic research group noted that projections by the Bureau of Labor Statistics call for annual labor force growth averaging just 0.6% per year over the next 13 years, compared to 1.5% per year between 1948 and 2012.
Fannie economists estimate there will be greater participation rates for all sexes and age groups going forward. But even under this “optimistic scenario” projected labor force growth would average only 0.9% going forward, which is still below the historic average.
The GSE economists expect a healthy rebound in
