Even as data becomes ever more critical as an instrument for decision-makers to measure the validity and calculate the effects of their choices, Uncle Sam, one of the universe's biggest data gatherers, seems to have a great deal of difficulty counting the most basic things.
The Census' latest homeownership and Vacancy Survey (HVS) reports that, by its lights, household formations feel in 2015 Q4, to an estimated 462K. This, of course, would be very worrisome if it were true, for it would equal the level of the worst of the recession for a measure that's supposed to be on the up and up.
Fact is, it's probably, or more than probably, not true. Jed Kolko notes that the Census updated its HVS housing-unit controls, which could account for the mathematical distortion. To cut through the arithmetic error, Kolko proposes an alternative way to get at a more accurate reading of household formations:
The number of households equals the number of adults times the headship rate, which is defined as the number of households per adult. Among adults 16+, the headship rate is roughly 50% — in other words, there are about two adults age 16+ in the average household.
Multiplying the adult population in each time period by the headship rates yields an estimate for the number of households. In 2014 Q4, that equaled 124.9 million. In 2015 Q4, that equaled something in the range of 125.8 – 126.1 million, depending on whether you use the 0.8% or 1.0% estimate of adult civilian non-institutionalized population growth.
Voila, a very likely more precise reading of household formation increase by 900k at the low end and 1.1 million at the higher end of the spectrum. Calculated Risk's Bill McBride notes that one would better base household formation estimates on the decennial census vs. the HVS, which he, like other housing economists, asserts is flawed.
Count on that.