Depressed US Birthrates Are Undermining The Housing Recovery en-us Wed, 31 Dec 1969 19:00:00 -0500 Mon, 17 Mar 2014 13:08:40 -0400 Mike "Mish" Shedlock velideli Sat, 25 Aug 2012 14:08:52 -0400 Mish, I love ya, baby, listen to ya all the time on Coast to Coast, but you are WRONG this time. The problem with housing is a. Too many older and foreclosed houses on the market Depressed income makes new(or ANY ) house) out of reach (if they even HAVE a job). c. It costs more to build a new house(well built one anyway) than a good used home.. <a href="" target="_blank"></a> <a href="" target="_blank"></a> Printus Maximus Fri, 27 Jul 2012 21:16:39 -0400 After looking at your numbers, I would tend to agree with you, but your data only goes up to 2009, while Mish's graph is actually a graph of fertility rate and not birthrate. I am having trouble correlating the two data sets, as for instance a birthrate of zero with a constant number of women would result in the same fertility rate. So to get such a change in the fertility rate, one needs to decrease the total number of births by 5% or increase the number of women by 5% or some combination of both. To get a faster response to the fertility rate one only needs to consider the number of women in their childbearing years and the number of births during these years: for example the number of women aged 18 to 45 and the number of births between 1983 and 2010. Considering 3,638,933 births occurred in 1983 and 4,131,019 in 2010, there would need to be a 18% greater number of women born in 1993 than in 1966 to drop the fertility rate by 5% while maintaining the number of live births. The other thing to consider is the multiplier effect of first-time home buyers and the velocity of house exchange, as well as those exiting the home ownership market. Nick Fri, 27 Jul 2012 21:07:32 -0400 Children are all about the future. You need to be optimistic about the future to have children. Because no parent wants to see his or her children suffer. Most people would rather not have any children at all, than to have children and see them suffer from unemployment and other problems in society. A low birth rate is an indication that many people aren't optimistic about their future and the future of their children in the country. Printus Maximus Fri, 27 Jul 2012 19:03:35 -0400 In actuality, birthrate is a poor indicator, since a couple with four children and a couple with three children will average out with 3.5 children per household and both will desire a single family house to raise their children. Now suppose you now have two couples, each with two children. The birthrate has dropped, but the desire for a single family home has not. Now suppose you have two couples, one married with 2 children, the other unmarried and each marginally employed living at home with their parents. The birthrate has dropped to an average of one per couple while house desirability has also dropped to one per couple. Mish's point is, as the number of children per family has decreased, it becomes more of an indicator. If you take it to the extreme and assume all couples only have one child in their second year, then birthrate becomes 100% correlated to the family formation rate, and if there is a high correlation between the birth of a child and house purchase, then a declining birthrate indicates a declining house demand. A growing population does not necessarily need more housing. Take for instance my niece in Florida. While going to university she shared a house with her boyfriend and 3 other guys. After graduating and getting married, she was still sharing the house with her husband and 3 other guys since with their income they could not afford an apartment by themselves. Finally, about a month ago she her husband and his brother were able to rent an apartment. Do you think she is thinking of starting a family or buying a house in the next year or so? Housing demand in this case is based on the tradeoff between affordability (and the desire to save) and privacy/convenience. In reality the most afforable housing would be a dormitory type situation with an individual bedroom for privacy and a common bathroom, kitchen/dining and recreation room. And you can have infinite "pent-up" demand, but without income or credit you will not have any "real" (monetizable) demand. Willy Melson Fri, 27 Jul 2012 18:32:22 -0400 Hmmm . . . . sounds like a WASP fertility issue. Most recently arrived Latinos and Muslims are cranking em out. ( if anyone thumps this message because their PC wimps check the "demographic stats" before you Chick-fillet the message ) This is still Amerika . . . . isn't it . LOLRO PatrickSprouse Fri, 27 Jul 2012 17:49:28 -0400 I did read the article, and as you point out, the headline is terrible. You restated Mish very well: "So as Mish said, poor finances and debt are lowering the birthrate which was the foundation for house purchases prior to the now burst housing bubble." And this is exactly what is wrong with what Mish hypothesizes. Home purchases have very little if any correlation to birth rate. First, the birth rate has been declining since 1959 (<a href="" target="_blank"></a>) yet housing has not been suffering since 1959, but rather since 2007(ish). Second, the recent significant decline in birth rate happened in about 2009 (<a href="" target="_blank"></a>). And third the birth rate is calculated as a percent of population, the absolute numbers show that there has been little significant decline in births since 2005 (7,000 total fewer per year in 2009 than 2005, and 2009 was the year the crude birth rate dropped) (<a href="" target="_blank"></a>). What we actually have is a growing population (not even accounting for immigration). A growing population needs shelter, but somehow this growing population has not accounted in recent years for growing demand of housing (hence the studies projecting of 'pent up housing demand'). So if our population has grown and is growing at about the same absolute number as prior to the housing downturn - and the crude birthrate was declining during the housing boom as well as before it - I am not sure that the empirical evidence supports the hypothesis. Housing demand may be influenced on the individual level by birth and household head count, but on a national scale, I think the idea that birthrate is and indicator of housing demand just doesn't work - its not a causality, nor does it correlate. Printus Maximus Fri, 27 Jul 2012 17:12:45 -0400 If you read the article vs. BI's headline you would see: "postponement of marriage on account of student debt and poor finances are two of the key reasons that I long-ago stated the housing recovery would be slow for a decade. Declining birthrates now show that is indeed what is happening." an thus birthrates are a lagging indicator. The normal progression has been: job (income) -> household formation (marriage) -> wealth formation (renting while paying off debts and saving the downpayment) -> family formation (childbirth) -> house purchase (residence) Of course for the last decade or so with Greenspan & Bernanke policies it has been: job (income) -> credit formation (applying for a mortgage) -> house purchase (assumed investment) So as Mish said, poor finances and debt are lowering the birthrate which was the foundation for house purchases prior to the now burst housing bubble. PatrickSprouse Fri, 27 Jul 2012 16:31:37 -0400 "The impact on home prices and demand for goods to furnish those homes is surely not priced into any existing economic models on housing starts, home prices, or the stock market." It goes without saying any 'impact on home prices' is a variable in an 'economic model on...home prices' The stock market isn't much different. Home prices are up, so is Toll Brother's profit, and hence share price. People buying more furniture? Ethan Allen stock will probably reflect the increase in revenue expectations, etc. For housing starts, manufacturing orders and retail sales are often used as a barometer for when to build. The underlying assumption on both of those examples are increases in consumer demand which will lead to business expansion to meet demand, which will lead to jobs, which will lead to housing demand growth. Builders want to time this cycle right, so they look at the early leading indicators....So of course the impact of jobs and consumer demand on home prices and furnishing sales is input into decision making models for housing starts - but I am not sure how it would be input into a model to reflect housing starts....'adjusted for demand?' That's already done - no demand - no housing starts. John Sheridan Fri, 27 Jul 2012 16:26:18 -0400 Mish, I love ya, baby, listen to ya all the time on Coast to Coast, but you are WRONG this time. The problem with housing is a. Too many older and foreclosed houses on the market Depressed income makes new(or ANY ) house) out of reach (if they even HAVE a job). c. It costs more to build a new house(well built one anyway) than a good used home.. PatrickSprouse Fri, 27 Jul 2012 16:15:11 -0400 Birthrates have nothing to do with the housing recovery. 1) The birthrate has been declining since about 1959. Housing has not been deteriorating since 1959. 2) I think you may be conflating household formulation with housing - they are not the same. 3) Housing is driven by one thing, jobs. People live where there are jobs, and jobs provide the income necessary to produce demand for housing (own or rent). 4) By your own analysis, a housing recovering is much more likely to signal a future increase in birthrates, opposed to increases in birthrates signalling a housing recovery. James Andrews Fri, 27 Jul 2012 16:13:49 -0400 What a shock. Fewer young Hispanics crossing the border illegally and we create fewer anchor babies. Shocking. in this day and age Fri, 27 Jul 2012 16:07:32 -0400 And pray tell, in this atmosphere but including the structural headwinds against men, what man in their right mind would want to formalize an arrangement like marriage with a women? Reality is one thing, if one finds the right partner , then who cares about everything else but given the fact that men that use their heads can get the best part without the commitment given the paucity of men with good jobs and all, why botther getting married