HH Formation | Is The Ball (finally) Underwater?: HH Formation has been growing at a premium to new construction in recent years, raising concerns around a real and growing construction deficit. There is, however, one significant caveat. A large portion of Household Formation growth has been in the form of shared households – the so called “basement dwelling” phenomenon.
From 2007 to 2018 the number of shared households increased by 5.1mn, driving its share of total households up by +250bps, from 17.0% to 19.5%.
In other words, what ostensibly looked like excess demand and a ball under water catalyst for new construction volumes was mostly illusory and a function of the significant rise in shared household formation. The good news is that the rate of shared household formation has slowed meaningfully the last few years (from 2013-2018, the change in shared households as a percent of total households has only been 0.5% … which compares to a share increase of 2% from 2007-2013).
In other, other words, what was an illusory construction deficit in now transitioning to an actual construction deficit.