We’ve Talked Houses, How About Households?
The Census Bureau defines household very simply – “all the people who occupy a housing unit.” To many people, household is synonymous with “family”, but that isn’t necessarily the case – the Census Bureau tracks both family and non-family households. In fact, non-family households have been growing at a faster rate than family households due to a variety of economic, cultural and demographic factors.
Total household formation has run below trend for a number of reasons – economic uncertainty (high unemployment rates) among the younger, key household forming age groups and associated higher stay at home rates have certainly been a contributing factor, and are factors that we would argue are cyclical in nature.
From 2007 – 2011, the total number of households in the U.S. increased 2.67 million or 2.3%. During that same period, the number of shared households increased 2.02 million or 10.2%. It seems clear to us that many people elected to “double-up” households during this period – this too, we believe is cyclical in nature.
We believe a household formation “deficit” exists – the long-term relationship between the employment age population (15+) – intuitively the lower limit of an individual’s household forming ability – and the number of households in the U.S. suggests that the current U.S. population over the age of 15 could support 122.85 million households, 1.77 million above the current (2012) level (Exhibit 1).
How to play this deficit? One direction investors may not immediately look is pet-ownership – the percentage of households that own a pet has grown consistently over time, from 52.8% in 1994 to 72.9% in 2010 (and grew during and through the Great Recession as well), so to the extent that we see household formation accelerate, the number of pets owned will likely accelerate as well. Speaking from personal experience, my house is definitely more of a kennel at times than it is a home. We think PETM makes sense in this context.
We will address other potential implications of this theme going forward – including looking at divorce and marriage rates, as well baby-making.
For the full report, please see our published research.