19 Jun Report: Lower household formations put San Diego real estate, economy in neutral
San Diego’s economy could remain stagnant — and real estate in San Diego could suffer as a result — if the area’s number of people per household doesn’t increase soon, a think tank report warns.
A report by the National University System Institute for Policy Research found that before the recession, the number of people per household in San Diego was 2.7 persons. It’s now at 2.8. While the one-tenth of a point increase may seem miniscule, it’s a significant shift in five years and puts San Diego well below historic household growth averages. It translates into 6,000 households, compared to 27,500 households, that would have formed based on historic averages.
The numbers don’t mean San Diego isn’t growing. The population in San Diego has increased 42 percent, to 129,926 since the recession. It does, however, mean that the number of households, which only grew 1.7 percent, during that time, is shrinking. The report said the lower figures could cool new residential home construction, stall new housing developments and limit job growth in some industries.
Numbers could impact real estate in San Diego
The number of new households in a community is a huge economic driver. New schools, new businesses to serve more residents and upticks in real estate in San Diego, especially home rentals and new home construction, are common during household increases. It particularly impacts the residential and commercial construction building markets. Last year, there were 8,315 new units created, according to building permit data. That’s half the 15,000- 16,000 new building units created from 1990 to 2006, the report said.
A big reason behind the lower household formation averages is that younger people today are less likely to leave the relative security of their parents’ homes. Before the recession, 27 percent of 18- to -34-year olds lived with their parents. Today, that number is 31 percent, mostly due to the recovering economy and a lackluster job market, as more younger people saddled with college debt struggle to find work and delay renting homes and buying properties to live with their parents.