Stat of the Day: The Rise of the Renter

Millennials Outnumber Boomers, but They've Been Slow to Form Households

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One surprise from Census 2010 was the skewed distribution of household growth by age. Except for a small increase in millennial renters, virtually all of the 11 million unit household growth from 2000 to 2010 took place among baby boomer and older households. Towards the end of the decade leading up to the Census, millennials sharply slowed their rate of household formation. Adverse economic conditions meant that millions of them just remained living with their parents.

Therefore, we expect big changes in the age distribution of households over the next 10 years as leading-edge boomers become senior citizens and millennials form new families or other types of households in large numbers. The 2010 Census found that the millennials, who will form those households, number 84.7 million compared to 81.5 million baby boomers. Every year from now on, Census Bureau estimates will find slightly fewer baby boomers due to mortality, but likely more millennials, due to immigration.

The 2010 Census found that the millennial households (those 23.5 million under age 35) plus the Gen X households (the 21.3 million ages 35 to 44) together number 44.6 million and represent 38% of all 116.7 million U.S. households. However, they don't yet outnumber baby- boomer households, who at 46.2 million constitute 40% of all US households. Households of today's senior citizens age 65 or older number just 25.8 million, or 22 % of the total.

The lingering effects of the housing bust and widespread foreclosures can be seen in the fact that renters increased faster than homeowners in every cohort of the age distribution.

Looking at the chart of owner and renter growth by age tells us three things.

First, millennials will soon start forming households. They have to because, sooner or later, with very few exceptions, young adults must leave their parents' home. That will reverse the declining number of households under age 45 and possibly revive the ailing housing market.

Second, the most rapid growth of households from now until 2020 will happen as baby boomers age into their late sixties and early seventies. As a result the age cohort 65 to 74 years old will probably grow at least 5% per year. If large numbers of those leading-edge boomers decide to sell their home and downsize to a smaller one, or if more decide to buy a second home someplace, the impact on the housing market would be substantial.

Third, this decade will certainly be another one of double-digit growth in households ages 75 or older. This suggests there will be continually rising demand for senior housing of one kind or another, including continuing-care retirement communities. Since fewer of these seniors will be driving, taxi or van services will flourish along with home care and home-maintenance firms.