The Decline in Geographic Mobility

January 6, 2014

Geographic mobility, the movement of people within the United States, declined steadily over the past three decades. Between 1984 and 1985, 20.2% or one out of every five Americans over the age of 1 year moved. In the most recent period, between 2012 and 2013, the mover rate was only 11.7%. The mover rate is a measure of geographic mobility provided by the Census Bureau, calculated by taking the number of movers divided by the total population over 1 year old.

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The decline in geographic mobility is due to a combination of factors. In a recent paper from the Federal Reserve discussion series, researchers find declining labor market transitions, rising homeownership rates, and an aging population to be contributing factors.

To better understand the effect of an aging population on geographic mobility, it is useful to examine the distribution of movers by age. According to the Census Bureau, 23.2% of those 25 to 29 years moved between 2012 and 2013. After 30, the share declines with age and for those 65 years and older only 3.7% moved between 2012 and 2013.

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The number of seniors is steadily increasing. By 2030, the Department of Health and Human Services forecasts that there will be 72.1 million seniors representing 19.3% of the total population. The long-run implication is that measures of geographically mobility are unlikely to return to levels seen in the mid-eighties.

Instead of focusing on measures of geographic mobility for the entire population, it is often useful to pay close attention to the mobility of a specific age group. Individuals between the ages of 25 to 29 years are of interest to housing sector because these individuals represent future first-time homebuyers. Individuals in this age group are typically transitioning into the labor, marriage, and housing market. The Census estimates the median age at first marriage in 2013 for men was 29 years and 26.6 years for woman. In addition, using data from the Census Bureau’s American Housing Survey, NAHB estimates the average of the first-time homebuyer to be 33.

Between 2012 and 2013 the mover rate for those 25 to 29 years was 23.2%. According to the Census, the most common discernible reason for moving between 2012 and 2013 for those between 25 and 29 was to establish own household at roughly 14.2%. The next distinguishable category of movers at 13.9% did so to new or better housing.

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For the second straight period, the share of movers doing so to own rather than rent a home increased. Between 2012 and 2013, 5.2% of all movers in this age group did so to own rather than rent whereas between 2011 and 2010 4.4% did so to own rather than rent.

Overall, measures of geographic mobility for the entire population declined from the prior period. The aging population makes it unlikely that measures will recover to prior levels. Instead, focusing on the most mobile age group, those between 25 and 29 years, it appears as though reasons for moving are promising in that the most common discernible reason was to establish own household.

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Uneven Aging

September 27, 2013

One in every eight Americans is now over the age of 65. The senior population (65 and older), is estimated by the Census to be 40.3 million in 2010, increased 15.1% from 2000. By 2030, the Department of Health and Human Services forecasts that there will be 72.1 million seniors representing 19.3% of the total population. The aging of the American population represents unique challenges and opportunities for the housing industry as this segment of the population makes housing choices based on longer life expectancy.

Although all 50 states, with the exception of Rhode Island, experienced growth in the senior population from 2000 to 2010, the growth rate and the percent of population 65 years and older is not the same across all states. The uneven aging of America is largely attributed to the increased social and financial cost of moving as one gets older.

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In a relevant study, the differences in the growth rate by states for the population above and below the age of 45 are examined. The author finds that in 28 states the population below age 45 declined from 2000 to 2010 while at the same time the population above age 45 increased. The study provides a direct link between geographic mobility and observed differences in senior growth rates and percent of total population by state.

For example, in Pennsylvania from 2000 to 2010, the population under 45 decreased by 5% as many left to state to pursue economic opportunities elsewhere. However, the population over 45 increased by 16% as many residents decided to “age-in-place.” This pattern of migration made it possible for Pennsylvania to maintain the fourth highest share of its population 65 and older while experiencing the smallest growth rate in the senior population.

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Source: The Uneven Aging and “Younging” of America – William H. Frey

In Texas from 2000 to 2010, on the other hand, the population under 45 increased by 13% as many migrated to the state to purse better economic opportunities. Migration coupled with an above average birth rate made it possible for Texas to maintain the third lowest share of its population 65 and older while still experiencing a significant growth in the senior population of 26.1%. The significant growth rate was largely the result of the internal aging of the population, however Texas is also ranked in the top ten as a retirement destination based on low cost of living, modest taxes, and nice weather.

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Source: The Uneven Aging and “Younging” of America – William H. Frey

Households headed by seniors are predominantly owned. According the Census Bureau’s 2011 Current Population Survey, among households headed by seniors, 81% were owners and 19% were renters. Although this figure has been relatively consistent over the last decade, longer life expectancy will force many seniors to make housing choices to better serve their needs. These choices may include smaller housing to account for empty nesting, multigenerational housing, remodeling to “age-in-place,” and when necessary assisted living. The extent of the increase in demand for these housing solutions will vary by state and shape builder business strategies in the years ahead.


Homeownership Rate Inched Lower During the First Quarter

May 1, 2013

The homeownership rate declined slightly during the first quarter of 2013, falling to a seasonally adjusted reading of 65.2%. This marks the lowest reading since the end of 1995 and a 4.2 percentage point drop versus the peak observed in mid-2004. While the homeownership rate is somewhat lower than its 20-year historical average, the rate has not fallen as low as some analysts anticipated, due in part to a sluggish pace of new household formations. In other words, though the numerator (owner-occupied households) has fallen, still-slow growth in the denominator (total occupied households) has kept the homeownership rate from falling lower.

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Across age groups, homeownership rates either remained flat or declined versus the first quarter of 2012. The largest percentage point decline in the homeownership rate occurred within the group of households headed by someone aged between 35 and 44 years (1.3 percentage points), followed by a 0.8 percentage point decline within the 55-64 householder cohort. Each of the householder cohorts have registered declines in the homeownership rate since peaking around the mid-2000s, but the relative degree of contraction across cohorts has been evident.

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Householders aged between 35 and 44 years have experienced the largest decline in homeownership rates, falling ten percentage points in the past eight years and reaching an all-time recorded low of 60.1% during the first quarter of 2013. By contrast, the homeownership rate for households headed by someone 65 years or older is currently 1.4 percentage points below its peak and has remained above 80% in all but two quarters since the second half of 2007.

The continuing slide in homeownership rates among the 35 to 44 and under 35 householder age groups are a concern for longer-term housing demand going forward, fluctuations within the 45-54 and 55-64 cohorts will affect the outlook with greater immediacy. Combined, these cohorts are the largest groups of homeowners and represent a primary source of “move-up” demand, whereby current owners trade their existing homes for newer and/or larger living spaces. The rate at which householders in these age groups become homeowners (again, in most cases) will be an important part of the housing market’s overall recovery.

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The Census Bureau’s quarterly survey also provides estimates of vacancy rates among the stock of owner and rental housing. The rental vacancy rate continued its downward trend during the first quarter of 2013, declining 20 basis points from a year ago to 8.6%. In addition, on a 4-quarter moving average basis, the rental vacancy rate dropped to its lowest reading since the end of 2001. The homeowner vacancy rate dipped 10 basis points compared to the first quarter of 2012 and has held steady at a 4-quarter moving average of 2% in each of the last two quarters. In addition, the homeowner vacancy rate has trended significantly lower since the toughest days of the housing market downturn and remains in range of levels occurring prior to the boom and bust period.


Homeownership Rate Holds Steady in Fourth Quarter

January 29, 2013

The seasonally adjusted homeownership rate remained unchanged at 65.3% during the final three months of 2012. For the year as a whole, the homeownership rate averaged approximately 65.5%–the weakest calendar year average since 1996. Homeownership rates declined across all age groups compared to the fourth quarter of 2011; however, the largest year-over-year decline occurred among households headed by a person aged between 35 and 44 years. In fact, the newest reading is down nearly two percentage points and has fallen to a new all-time recorded low of 60.4%.

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While all householder age groups have seen homeownership rates contract from mid-decade peaks, the overall decline registered by the 35-44 year cohort has been the largest. Indeed, the homeownership rate for this age group has plunged nearly 10 percentage points below its peak level observed in mid-2004. By comparison, the homeownership rate among households headed by a person aged 65 years and older has remained above 80% for the wide majority of quarters over the past three years.

Even though the trend in homeownership among younger households is a notable downside risk for long-term housing demand should it prove difficult to reverse, the 45-54 and 55-64 cohorts will likely have a more immediate impact to the outlook. These two age groups constitute the largest blocks of homeowners and are considered key sources of “move-up” demand, trading their existing homes for newer and/or larger living spaces. The rate at which these households become homeowners versus renters will be a key variable to watch going forward.

In addition to reporting the homeownership rate, the Census Bureau report provides an estimate of the vacant owner and renter housing stock. The rental vacancy rate inched slightly higher during the fourth quarter of 2012 to 8.7%, but remains 70 basis points lower compared the same period a year ago. While rental vacancies increased slightly, the homeowner vacancy rate remained steady at 1.9% to close out 2012, tying the third quarter for the lowest vacancy rate since late 2005.

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Homeownership Rate Slips during the Third Quarter

October 31, 2012

The Census Bureau reported the seasonally adjusted homeownership rate fell to 65.3% during the third quarter of 2012. In terms of rates across age groups (which are not seasonally adjusted), only those households headed by persons 65 and over registered an increase in the homeownership rate versus the third quarter of 2011. The under 35 and 55-64 householder cohorts saw the largest declines, with each showing a 1.7 percentage point drop-off in the homeownership rate compared to a year ago.

With the homeownership rate dropping to its lowest reading since the first quarter of 1996, it stands to reason that many of the underlying householder age groups have rates hovering at very low levels. Indeed, the homeownership rate among householders under 35 years of age is now at its lowest level on record at 36.3%–a 7.3 percentage point decline from its peak reading back in mid-2004. However, the largest percentage point decline for any particular homeowner cohort was among the 35-44 age group, as the homeownership rate remains 8.7 points lower compared to its cyclical peak.

Recent trends in homeownership rates among the younger age groups are concerning, and could affect the dynamics of homeownership over the long term—particularly if many of these individuals do not transition back from renters to buyers. Homeownership rates among the 45-54 and 55-64 cohorts will have a larger influence on the near-term outlook, since these two age groups are the largest blocks of homeowners. With the pace of job growth expected to pick up modestly going forward, household formations among these two specific cohorts should recover, including those households that were lost as deteriorating financial circumstances and/or some negative economic event (e.g. home foreclosure) forced people into combined living arrangements.

The homeownership rate is only one feature of this Census Bureau report, as it also provides data on trends in the vacant housing stock. The rental vacancy rate held steady at 8.6% during the third quarter, tying last quarter’s mark as the lowest reading on the rental vacancy rate since mid-2002. NAHB’s own Multifamily Vacancy Index revealed continued tightening of apartment supplies during the second quarter of 2012, though at a slightly lower pace. The homeowner vacancy rate declined to 1.9% during the third quarter of 2012, its seventh consecutive quarter-to-quarter decline and lowest level in 7 years.


Homeownership Rate Holds Steady during Second Quarter

July 30, 2012

The Census Bureau reported the seasonally adjusted homeownership rate remained unchanged at 65.6 percent during the second quarter of 2012, hovering at a 15-year low for the 2nd consecutive quarter. The performance across household head age groups was mixed as the under 35 and 55-64 cohorts saw homeownership rates decline compared to the first quarter of 2012. By contrast, homeownership rates improved for the three remaining age groups, with the largest gain observed for householders between the ages of 35 and 44.

Aside from the householders aged 65 years and over, homeownership rates among the other age groups remain appreciably lower in comparison to the same period a year ago and significantly lower than their peak levels observed in the mid-2000s. The largest decline overall has been observed in the 35-44 age group, where the homeownership rate has tumbled nearly 9 percentage points.

The ongoing large decline in homeownership among younger cohorts is worrisome; however, since the 45-54 and 55-64 age groups account for nearly half of all owner-occupied households combined, fluctuations in homeownership among these two age groups will likely have more visibly significant impacts on overall homeownership rates. Fortunately, as economic conditions continue to improve and members of these two older age groups begin to form new households (or re-constitute former as they move out of combined living arrangements), they should tend towards buying rather than renting.

In addition to the homeownership rate, this report also examines trends in the vacant housing stock. The rental vacancy rate declined for the third consecutive quarter, falling to 8.6%–the lowest reading in a decade. Other sources, such as NAHB’s own Multifamily Vacancy Index, reveal a similar downward trend in apartment vacancies. The homeowner vacancy rate has fallen steadily in each of the last six quarters, declining to a reading of 2.1%.


Pent-Up Housing Demand: Number of “Shared Households” Grew from 2007 to 2010

June 26, 2012

Earlier this month, the Census Bureau published  a report examining “household sharing,” which is the situation in which people join or combine households. While the report does not examine the causes of household sharing, it is widely accepted that the housing crisis and the economic impacts of the Great Recession have led many individuals to share housing in order to save money.

Household sharing has slowed the growth of total household formations, thereby leading to pent-up housing demand under the theory that many forms of household sharing are untenable over the long-run. As economic conditions improve, this pent-up housing demand will be unlocked, increasing the need for rental and owner-occupied housing.

The Census data look at the period covering 2007 through 2010. The Census defines a shared household as any “household which includes at least one ‘additional adult,’ who is a person aged 18 or older who is not enrolled in school and who is neither the householder, the spouse, nor the cohabitating partner of the householder.”

According to the data, the number of households rose from 116 million in 2007 to 117.5 million in 2010. It should be noted that this increase represents a historically small amount of household growth (over the last 30 years, according to the Current Population Survey, the net increase in households has averaged about 1.2 million per year).

The components within that total are even more telling. The total number of traditional, not-shared households fell by more than 700,000 (0.9%). In contrast, the number of shared households rose by almost 2.3 million (12.1%).

In the spring of 2007, 27.7% of adults lived in shared households. By the spring of 2010, that percentage had risen to 30.1%.

Perhaps surprising, the increase in shared households was not concentrated among the youngest of adults. The number of people aged 18 to 24 who were classified as an “additional adult” rose 5.9% over the 2007 through 2010 period. For those aged 25 to 34, the increase was even higher – 18.1%, or 45% of the total increase in shared households. For those aged 35 to 65, there was a still significant 9.7% increase in additional adults.

Those moving in with relatives accounted for 68% of the increase, making moving in with family members the most common occurrence. And adult children moving back in with their parents accounted for 46% of the increase, making that the most common specific event.