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What happens to household formation in a recession?

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  • Lee, Kwan Ok
  • Painter, Gary

Abstract

While many studies have investigated the determinants of housing demand, very few studies have focused on how economic conditions affect the formation of potential households directly. Potential households may choose to delay entry into the housing market by remaining with one’s parents during times of economic hardship or by combining with other persons to share housing costs. Using a variety of modeling approaches, we find that both the increase in the unemployment rate and the presence of recessions reduce the rate of household formation. Simulations suggest that these declines are substantively important. For example, in a recession, the likelihood that a young adult will form an independent household falls by 1–9% points depending on the age of the person. By way of comparison, if an individual is unemployed, the likelihood of leaving the parental home is up to 11% points lower.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 76 (2013)
Issue (Month): C ()
Pages: 93-109

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Handle: RePEc:eee:juecon:v:76:y:2013:i:c:p:93-109

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Housing demand; Business cycle; Household formation;

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References

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Cited by:
  1. Arnstein Aassve & Elena Cottini & Agnese Vitali, 2013. "Youth prospects in a time of economic recession," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(36), pages 949-962, November.

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