Historically low household formation stymies San Diego's residential building recovery
or when will the kids FINALLY move out?
Kelly Cunningham, NATIONAL UNIVERSITY SYSTEM INSTITUTE FOR POLICY RESEARCH
Thursday, June 12, 2014
Over the course of the recession, a number of residents doubled up households and children did not move out of their parent’s homes. San Diego’s average household size consequently rose from 2.7 persons per household to 2.8, a significant shift within just five years.
San Diego’s population has grown by 129,926 since the recession, an increase of 4.2 percent. In contrast, the number of households grew only 1.7 percent. If San Diego’s average household size remained the same as in 2007, more than 27,500 more households would have been added.
To a large extent the researchers found young people are choosing or being forced by circumstances to remain in their parent’s home longer than they would have in previous generations.
The combination of lower household formation, high unemployment and tightened lending standards crushed the local residential building economy. From an average of 15,000-16,000 new housing units added per year, residential construction countywide cratered to lows around 3,000. Since a low point in 2009, the number of units rose to 8,315 added during 2013, just a little more than half of pre-recession levels and still 3,300 housing units lower than the annual average added between 1990 and 2006.
This has had an impact on employment. At the height of the most recent boom, more than 90,000 workers were employed in construction and over 84,000 were employed among finance, insurance, and real estate (FIRE) sectors. Although these sectors added about 13,000 jobs the past four years, as of April 2014 local construction jobs number only 64,200 and FIRE sectors 66,800. While there are signs this part of the economy is starting to recover, lower rates of household formation are likely to dampen new residential construction and place an upward lid on new housing demand.