By David Lee Matthews
The local housing recovery is continuing, but a report shows how much better it could be.
Zillow Inc. examined the impact of household formation on demand for housing. As young adults move out of their parents' house or split up with roommates to get their own places, they form new households that need a place to live, such as an apartment or a single-family home.
The problem is that household formation has not picked up since the recession as much as it usually would after a downturn. Many adults are still doubling up to make ends meet amid rising rents and sluggish wage growth. In 2012 there were 1.88 adults per household in the Chicago area, versus 1.81 in 2000, according to Zillow.
As a result, the Chicago area has 138,728 “hidden households,” or households that would exist if the ratio returned to 2000 levels, according to Zillow, a Seattle-based real estate website. The figure helps explain why demand for housing could be so much stronger than it is.
“Like a coiled spring, all of these doubled up households represent tremendous potential energy for the market,” Zillow Chief Economist Stan Humphries said in a statement, referring to Zillow's national data.
Though the apartment market has been strong, the market for single-family homes and condominiums could use a jolt of energy. Home sales have fallen from last year and price growth has slowed in recent months.