The relationship between the housing and labor market crises and doubling up: an MSA-level analysis, 2005–2011
Data on rates of doubling up, cohabitation, and housing tenure (home ownership) are drawn from ACS annual data for the period 2005–2010. The prime advantage of the ACS is that, as the largest household survey in the United States, it has information on 3 million addresses. In all analyses, group quarters (i.e., dorms and institutional settings) are omitted as a household type. Using the ACS, two measures of doubling up are examined: (1) average household size and (2) the number of nonrelatives living in family households as a percentage of total number of people residing in family households.28 For completeness, the article also examines homeownership rates, defined as the percentage of households that are owner occupied. In interpreting these measures, homeownership rates reflect the investment component of housing demand whereas rates of doubling up provide information regarding consumption demand for housing (e.g., need for shelter). Finally, the article also looks at trends in the number of unmarried (opposite-sex) partner households as a percentage of total households. This latter measure differs from doubling up in that it provides information about the marriage versus cohabitation decision. Although cohabitation rates have been experiencing a secular increase, economic conditions also play an important role, given evidence that couples are more likely to defer marriage until they are able to afford it.29
The empirical analysis proceeds in two parts. First, the severity and relative timing of the housing and labor market crises are examined for the 353 MSAs for which complete data are available. This analysis uses quarterly data from second quarter 2005 through fourth quarter 2011.30 This analysis further focuses on the experience of 12 MSAs with distinct differences in the relative timing of their housing and labor market crises. The second part of the analysis investigates the association between the housing and labor market crises and changes in homeownership and doubling up. In this second portion of the analysis, the quarterly data on the housing and labor market variables are annualized to match the annual data available in the ACS.
National picture. To provide context for the analysis of MSAs, figure 1 presents information on national U.S. housing and labor market conditions for the period 2005–2011. Housing prices in the nation accelerated during the early to mid-2000s and, according to the FHFA House Price Index, reached a peak in first quarter 2007.31 From 2007 to 2010, housing prices declined nearly 13 percent on average in the United States, and the foreclosure rate—a measure of acute housing distress—rose from 0.87 percent to 3.26 percent, a whopping 274-percent increase.32 Trends in U.S. employment and unemployment are mirror images and both show a downturn in the labor market by the end of 2007 or early 2008. From 2007 to 2010, the unemployment rate rose from 4.6 percent to 9.6 percent, while employment fell by 5.6 percent. The data also show that the Great Recession’s start date of December 2007, as determined by the National Bureau of Economic Research, virtually coincides with the start of the labor market downturn. As shown in figure 1, the national situation from 2005 to 2011 can be described as having progressed through four distinct periods: the precrisis period (before 2007), the housing-crisis-only period (first quarter 2007–end of 2007), the housing recession period (end of 2007–summer 2009), and the postrecession period (after summer 2009). As of the end of 2012, the national unemployment rate remained only slightly below 8 percent.
28 The U.S. Census Bureau defines a family household as a household in which there is at least one person present who is related to the householder by birth, marriage, or adoption. (See U.S. Census Bureau website, https://www.census.gov/hhes/families/about/.)
29 Pamela Smock, Wendy Manning, and Meredith Porter, “‘Everything’s there except money:’ how money shapes decisions to marry among cohabitors,” Journal of Marriage and Family 67, August 2005, pp. 680–696.
30 Because the foreclosure data obtained by the authors from CoreLogic begin in second quarter 2005, all analyses use this period as the start date.
31 For a discussion of the unique set of events that precipitated the housing boom and the subsequent bust, see Karl E. Case and John M. Quigley, “How housing busts end: house prices, user cost and rigidities during down cycles,” in Susan J. Smith and Beverly A. Searle, eds., The Blackwell companion to the economics of housing: the housing wealth of nations (West Sussex, United Kingdom, Wiley–Blackwell, 2010). The authors describe the boom as being of “historical proportions.”
32 These figures were calculated by aggregating available monthly and quarterly data to the annual level.