As the parent of a couple of 20-somethings, I can attest to the difficulty that young people are having today going out on their own. Many college graduates are living at home while they make a seemingly endless search for work. Others are moving into group homes, often supported by their parents, while they take internships, or work low-paying jobs. Given today’s economic realities, it’s difficult to kick your kids out of the house and tell them to find a place of their own, like parents did in the ’70s and ’80s.

Boyce Thompson  Editorial Director
Photos: Katherine Lambert Boyce Thompson
Editorial Director

This basic drive to establish household independence is one of those forces on which the home building industry could always depend. During the 1990s and early 2000s, an average of 1.2 million households formed each year. Economists could take the “headship rate,” add demand for second homes and the need to replace demolished ones, and come up with a pretty good number for how many new homes needed to be produced each year. That’s a much more difficult calculation today. The latest U.S. Census Bureau numbers, for example, show that a meager 357,000 households formed during the year that ended in March 2010, the lowest rate in more than 60 years. And it happened even as the country continued to grow in excess of 2 million people a year.

As income levels fall, it’s getting harder and harder for young families to form their own households. The Census data show a decline of 124,000 in the number of young households, headed by people 15 to 24 years old. They also show an 8 percent increase in the number of households with six or more people in the home. That would indicate growth in big families or group homes.

The Joint Center for Housing Studies at Harvard University believes that the sharp slowdown appears to result from a reduction in immigration. It estimates that about one-third of household growth during the late 1990s and early 2000s came from immigrants. No one is sure of the current rate, but it’s probably slower.

Nevertheless, the Joint Center expects the headship rate to rise as the economy improves. It projects household growth of 11.8 million during the next decade if immigration is low and 13.8 million if immigration is high. That works out to 1.18 and 1.38 million new households a year respectively, which, it says, would support average annual housing production of at least 1.64 million units.

Given the current state of political and economic affairs, even the Joint Center’s “worst-case” scenario seems like a “best case.” Immigration seems more likely to be curtailed than loosened. And without progress on the jobs and earnings front, it’s hard to imagine a lot more young people going out on their own to establish households. The American public has gone through some pretty big economic changes in recent years that bode ill for a return to normal levels of housing production.

First, more than 8 million households have lost their homes to foreclosure. Their credit ratings shattered, they won’t be buying new homes for a while, no matter how badly they may want one. Second, we lost more than 9 million jobs during the last recession, though we’ve added back nearly 1 million private-sector jobs since the first of the year.

Given the latest Census headship count, it’s no wonder that the home building industry can’t move into a full-fledged recovery. That’s not going to happen until demand fundamentally improves, until people find good-paying jobs and feel confident that their prospects will improve.

The American dream of owning your own home is far from dead; it’s just gone underground. Living with roommates, or with family, only works for a while. And owning a home continues to be a big reason why immigration to this country has been strong.

But the reality is that for many households the dream of homeownership is going to be unattainable for a while. Renting a home, even if it’s a single-family home in shadow inventory, is going to be the only alternative.