Tight rental market holding back household formation - InvestingChannel

Tight rental market holding back household formation

The latest data on US households is out (through Q2) and the story remains the same. Household formation has stalled. US population is growing at about 0.7% per year while households grew at an annualized rate of 0.34% over the past two years.

Source: US Census

Part of the problem is weak residential construction spending which is keeping the supply of rental housing relatively tight.

Construction spending as % of GDP (units: 20 means 2% of GDP)

Rents are now rising at over 1% per year faster than wages, pricing many potential households out of the market. The chart below shows the rent component of the CPI less the year-over-year average hourly wage growth in the US.

The longer this goes on, the more out of reach affordable rental housing will become for new households. As discussed before (see post), this is going to become a major issue for the US in years to come.

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SoberLook.com

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