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After Years of Decline, Household Formation Rates Were Improving Pre-Pandemic. Now What?

There would be some 5.7 million additional households today if Americans formed households at the same rate they did in 2006.
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  • Americans of every age group and ethnicity are forming households at lower rates than before the Great Recession.
  • The trend of fewer households began to reverse in 2018 and 2019.
  • There would be 5.7 million more households if today's demographic groups formed households at the same rate they did in 2006.
  • The group with the largest number of missing households relative to 2006 is white 25- to 29-year-olds, whose headship rate dropped from 46.1% to 41.3%. The groups with the largest fall since 2006 in the ability or tendency to form households are Black 25-to-29-year-olds, whose headship rate fell from 48.4% to 39.3%.
  • Even at today's lower headship rates, there will be 6.4 million more households in 2025, because so many millennials are aging into their late 30s.

There would be some 5.7 million additional households today if Americans formed households at the same rate they did in 2006, a testament to widespread difficulties in securing affordable, accessible housing over the past decade-plus but also a potential indicator of enduring housing demand to come.

Home values nationwide plummeted between 2007 and 2013, taking the U.S. economy with them, but have since come roaring back over the better part of the last decade as the economy gradually recovered from the Great Recession. But this recent years-long housing recovery was missing an accompanying recovery in newly formed households, with the number of households headed by almost every demographic group steadily declining. That decline finally showed signs of leveling off and reversing by 2019, on the eve of the pandemic, but that progress may prove delicate and could delay millions of Americans from striking out and making a home of their own into the next several years.

The simplest explanation for why household formation fell much more quickly over the past decade or so is that for much of that time, Americans faced a handful of unique financial challenges. First, massive amounts of savings and equity were lost in the 2008 financial collapse and subsequent foreclosure crisis, impacting the ability of both older generations to retire and younger ones to shield their children from substantial college debt. At the same time, job opportunities and incomes fell precipitously from 2007-2011, which has long-lasting effects on individuals' ability and confidence to start a new household. And finally, at points during the recovery (notably from 2015-2017), rapid growth in home prices widely outpaced income growth over the same period, making it difficult to save for a down payment or the often substantial upfront costs of renting. Either way, would-be household heads of virtually all ages remained entangled with other family or roommates instead of creating a household of their own.

By 2018 and 2019, the broadening economic expansion seemingly began to finally outweigh these effects, with most demographic groups — especially twenty- and thirty-somethings — beginning to get their own homes at higher rates closer to historic norms. But even after the turnaround of the past two years, young Americans especially remain much less likely than prior generations to have a place of their own. The effect is most dramatic for 20-to-34-year-olds: Only 35% of this group were household heads in 2019, down from 39.2% in 2006. In other words, only 22.72 million of the 64.5 million total individuals in this group succeeded in becoming heads of their own household. 

If this age group had succeeded in creating newly headed households at the same rate as people their age did in 2006, there would be 12% more, or an additional 2,817,000, households on top of that 22.7 million — bringing the total number of 20-to-34-year-old householders to 26 million. To put that in perspective, that "shortfall" of 2.8 million households is more than twice the number of new homes built in the United States in 2019, when 1,386,000 new homes were completed.

Despite the fall in the rate of new household formation, the housing market has still seen significant gains in the number of households, and will soon see even more, largely because of the size of the maturing Millennial generation. Even at 2019's low age-specific headship rates, the surge of Millennials moving from their low-headship 20s into higher-headship 30s will mean 6.4 million more households by 2025, an increase from 130.5 million to 137 million, using Census population projections.

A Symptom of Slow Building, Eroding Affordability

That the decline in headship rates is so widespread across virtually all groups is a central signal that the housing market is struggling to provide enough affordable homes for all. If the decline in headship was largely limited to just those in their early 20s, that might be explained in part by more people in this group choosing to pursue higher education. But the decline in headship also happened for Americans in their 30s, 40s, and 50s. And within age groups, it is not explained by a changing composition as the population grows more diverse.

The narrative that younger generations are and will be delayed in life's major events includes the assumption that they will eventually catch up,  ultimately hitting the same milestones as previous generations. But the ever-falling headship rate across all ages changes that narrative, and signals that many more may never hit those milestones, that housing fundamentals have changed and that household formation and homeownership are more difficult. The Great Recession and financial collapse that cost U.S. homeowners roughly $6 trillion in home equity wealth simply sped up the process.

Want More Households? Build More Homes

Home building collapsed during the Great Recession and remained at depressed levels for several years. More new homes were completed in 2019 than in any other year of the past decade, and still there were far fewer homes built last year than in any other non-recession year in the postwar era. Particularly when adjusting for population size, which is key for predicting household formation, we are now building only about 2.6 single-family homes per 1,000 Americans, compared to a historical average of almost 4. Some of the challenges holding back new construction include a shortage of buildable land and the financing to acquire it; shortages of labor, as job openings for construction workers remain unfilled; and onerous permitting processes that add time and cost to the construction process.

On the eve of the pandemic, there were promising signs of a significant rise in new home construction, with new home starts exceeding 1.5 million (annualized) each month from December 2019 to February 2020. Those numbers came crashing down in March but builder confidence has come roaring back, and now October 2020 once again saw construction begin at an annualized pace above 1.5 million homes, suggesting a robust pipeline of expanded housing supply in the near future.

New households are formed by both renters and home buyers, but the first-time home purchase in particular has gotten harder as saving for a down payment in an environment in which home price growth rapidly outpaces income growth gets increasingly difficult. Higher student debt loads and rising rent burdens contribute to savings difficulties. But even if first-time buyers managed to save the same share of their income as their parents' generation, thanks to rapidly rising home prices and the steady increase in price-income ratios,  it would still take them years longer to save an adequate amount.

Turnaround, interrupted?

Despite the difficulties, progress was being made. Among 25-to-29-year-olds (the age range with the largest shortfall in households in 2017 relative to 2006 rates), the headship rate rose from a low of 37.1% in 2016 to 38.1% in 2019. And the increase was fairly uniform across race: The headship rate for white, Black, Hispanic, and Asian Americans & Pacific Islanders in this age range rose by 1.1, 0.7, 1.0, and 1.3 percentage points, respectively. This suggests that when America experiences a long-enough economic expansion — like the record-long period of growth that ended abruptly in March — then the economic freedom to set out and head a household at 2006 levels may just be within reach. 

If and when the economy begins recovering again once the pandemic has passed, it may very well be that the best outcome will show that the decline in headship was only temporary and that demand for homes that may have been satisfied this year will simply be pushed into next year and beyond. Even so, in only a few short months, the pandemic has proven how delicate progress can be. Millions of young adults moved back in with their parents in the early months of the outbreak, and while recent data suggest about half of them have already moved back out, big unanswered questions remain. 

Will the rest of Gen Z be able to keep setting out on their own, or remain set back for years to come like Millennials were in the wake of the Great Recession?

The post After Years of Decline, Household Formation Rates Were Improving Pre-Pandemic. Now What? appeared first on Zillow Research.

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Spread & Containment

SoCal Industrial Prioritizes Speed, Power and Sustainability 

Movement is key in the SoCal industrial space. Industrial real estate occupies some 200 million square feet of space in the SoCal region, with much of…

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Movement is key in the SoCal industrial space. Industrial real estate occupies some 200 million square feet of space in the SoCal region, with much of the activity driven by the Ports of L.A. and Long Beach. The swift movement – not storage – of goods from the port to their destinations, is priority. Currently, the industrial vacancy rate sits at 4%. While the increase in e-commerce during the COVID-19 pandemic caused industrial volume in the region to surge, volumes have declined 30% over the past year, returning to more normal, though still high, levels comparable to 2019.  

Attendees of I.CON West in Long Beach, California, had the opportunity to visit three impressive industrial properties in the SoCal region. The projects by Goodman, Watson Land Company and Bridge Industrial are in three different phases of completion and range in size from 165,000-500,000 square feet. 

The I.CON West group toured a 90-acre site in Long Beach purchased by Goodman, a globally traded real estate company, five years ago. The Goodman Commerce Center Long Beach was previously a Boeing manufacturing center with 100-foot clear heights that made it well suited for the current tenant Relativity, a company that makes 3-D printed rockets.  

Power is a major consideration for tenants in the region. Tenants are also asking for clear heights that are increasingly taller; the typical height in 2012 was closer to 32 feet, but buildings in the area are inching closer to the 40-foot range.  

Environmental concerns are top of mind in California. Long Beach requires a methane mitigation system and Boeing also required a vapor barrier to be added to the site as part of their land use covenant. The area was previously heavily comprised of oil fields, so vapor barriers are common. The state is working toward a 2035 goal of having 100% of new cars and light trucks sold in California be zero-emission vehicles, so sites are considering the current usage and future expansion of EV charging stations. Goodman’s site is equipped with 26 EV-charging stations but has the capability to expand to 100 more, as needs require. 

Watson Land Company’s site in Carson, California, is located in the South Bay, an area that includes many 1980s-era Class B buildings that are being redeveloped to meet modern usage and demand.  

One of the main challenges faced in this area is the heavy clay soil; Watson had to install an underground storm drain system to allow for percolation.  

One of the main advantages of the area is that it’s within the “Overweight Container Corridor” that allows for heavier vehicles – up to 95,000 pounds – to pass through with containers from the port.  

Watson Land Company is pursuing U.S. Green Building Council LEED Gold certification for this site; they were able to reuse or recycle 98.6% of the material crushed from the previous buildings. The company aims for LEED Silver or Gold in many of their buildings in California, part of its early legacy dating to the founding of Watson Land Company in 1912 with a commitment to serve as “good stewards of the land.” 

Another feature of the Watson Land Company’s building: ample skylights – a 3% skylight to roof ratio – and clerestory windows to bring in maximum natural light. 

For the final stop of the tour, attendees visited a former brownfield site in Torrance, California, developed by Bridge Industrial. Bridge Industrial considers their team problem solvers who can tackle sites like this one that require significant remediation. They have transformed the brownfield site into a modern, airy industrial facility with two stories of office space.  

Power, again, came up as a critical concern for tenants. Bridge Industrial used to provide 2,000 amps as the standard but now provides 4,000 amps as the new standard in response to tenant needs. One of Bridge Industrial’s buildings in Rancho Cucamonga (roughly a two-hour drive east from Long Beach) offers 4,000 amps with provisions for additional future service up to an astonishing 8,000 amps.   

With the dual ports and the LAX airport nearby, SoCal is poised to continue its strong industrial presence. Port activity, environmental regulations and evolving tenant demands – including for increasing power capabilities – are critical considerations for developers, owners and investors operating in this bustling region.


This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at www.us.jll.com or www.jll.ca.

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International

Chronic stress and inflammation linked to societal and environmental impacts in new study

From anxiety about the state of the world to ongoing waves of Covid-19, the stresses we face can seem relentless and even overwhelming. Worse, these stressors…

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From anxiety about the state of the world to ongoing waves of Covid-19, the stresses we face can seem relentless and even overwhelming. Worse, these stressors can cause chronic inflammation in our bodies. Chronic inflammation is linked to serious conditions such as cardiovascular disease and cancer – and may also affect our thinking and behavior.   

Credit: Image: Vodovotz et al/Frontiers

From anxiety about the state of the world to ongoing waves of Covid-19, the stresses we face can seem relentless and even overwhelming. Worse, these stressors can cause chronic inflammation in our bodies. Chronic inflammation is linked to serious conditions such as cardiovascular disease and cancer – and may also affect our thinking and behavior.   

A new hypothesis published in Frontiers in Science suggests the negative impacts may extend far further.   

“We propose that stress, inflammation, and consequently impaired cognition in individuals can scale up to communities and populations,” explained lead author Prof Yoram Vodovotz of the University of Pittsburgh, USA.

“This could affect the decision-making and behavior of entire societies, impair our cognitive ability to address complex issues like climate change, social unrest, and infectious disease – and ultimately lead to a self-sustaining cycle of societal dysfunction and environmental degradation,” he added.

Bodily inflammation ‘mapped’ in the brain  

One central premise to the hypothesis is an association between chronic inflammation and cognitive dysfunction.  

“The cause of this well-known phenomenon is not currently known,” said Vodovotz. “We propose a mechanism, which we call the ‘central inflammation map’.”    

The authors’ novel idea is that the brain creates its own copy of bodily inflammation. Normally, this inflammation map allows the brain to manage the inflammatory response and promote healing.   

When inflammation is high or chronic, however, the response goes awry and can damage healthy tissues and organs. The authors suggest the inflammation map could similarly harm the brain and impair cognition, emotion, and behavior.   

Accelerated spread of stress and inflammation online   

A second premise is the spread of chronic inflammation from individuals to populations.  

“While inflammation is not contagious per se, it could still spread via the transmission of stress among people,” explained Vodovotz.   

The authors further suggest that stress is being transmitted faster than ever before, through social media and other digital communications.  

“People are constantly bombarded with high levels of distressing information, be it the news, negative online comments, or a feeling of inadequacy when viewing social media feeds,” said Vodovotz. “We hypothesize that this new dimension of human experience, from which it is difficult to escape, is driving stress, chronic inflammation, and cognitive impairment across global societies.”   

Inflammation as a driver of social and planetary disruption  

These ideas shift our view of inflammation as a biological process restricted to an individual. Instead, the authors see it as a multiscale process linking molecular, cellular, and physiological interactions in each of us to altered decision-making and behavior in populations – and ultimately to large-scale societal and environmental impacts.  

“Stress-impaired judgment could explain the chaotic and counter-intuitive responses of large parts of the global population to stressful events such as climate change and the Covid-19 pandemic,” explained Vodovotz.  

“An inability to address these and other stressors may propagate a self-fulfilling sense of pervasive danger, causing further stress, inflammation, and impaired cognition in a runaway, positive feedback loop,” he added.  

The fact that current levels of global stress have not led to widespread societal disorder could indicate an equally strong stabilizing effect from “controllers” such as trust in laws, science, and multinational organizations like the United Nations.   

“However, societal norms and institutions are increasingly being questioned, at times rightly so as relics of a foregone era,” said Prof Paul Verschure of Radboud University, the Netherlands, and a co-author of the article. “The challenge today is how we can ward off a new adversarial era of instability due to global stress caused by a multi-scale combination of geopolitical fragmentation, conflicts, and ecological collapse amplified by existential angst, cognitive overload, and runaway disinformation.”    

Reducing social media exposure as part of the solution  

The authors developed a mathematical model to test their ideas and explore ways to reduce stress and build resilience.  

“Preliminary results highlight the need for interventions at multiple levels and scales,” commented co-author Prof Julia Arciero of Indiana University, USA.  

“While anti-inflammatory drugs are sometimes used to treat medical conditions associated with inflammation, we do not believe these are the whole answer for individuals,” said Dr David Katz, co-author and a specialist in preventive and lifestyle medicine based in the US. “Lifestyle changes such as healthy nutrition, exercise, and reducing exposure to stressful online content could also be important.”  

“The dawning new era of precision and personalized therapeutics could also offer enormous potential,” he added.  

At the societal level, the authors suggest creating calm public spaces and providing education on the norms and institutions that keep our societies stable and functioning.  

“While our ‘inflammation map’ hypothesis and corresponding mathematical model are a start, a coordinated and interdisciplinary research effort is needed to define interventions that would improve the lives of individuals and the resilience of communities to stress. We hope our article stimulates scientists around the world to take up this challenge,” Vodovotz concluded.  

The article is part of the Frontiers in Science multimedia article hub ‘A multiscale map of inflammatory stress’. The hub features a video, an explainer, a version of the article written for kids, and an editorial, viewpoints, and policy outlook from other eminent experts: Prof David Almeida (Penn State University, USA), Prof Pietro Ghezzi (University of Urbino Carlo Bo, Italy), and Dr Ioannis P Androulakis (Rutgers, The State University of New Jersey, USA). 


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Acadia’s Nuplazid fails PhIII study due to higher-than-expected placebo effect

After years of trying to expand the market territory for Nuplazid, Acadia Pharmaceuticals might have hit a dead end, with a Phase III fail in schizophrenia…

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After years of trying to expand the market territory for Nuplazid, Acadia Pharmaceuticals might have hit a dead end, with a Phase III fail in schizophrenia due to the placebo arm performing better than expected.

Steve Davis

“We will continue to analyze these data with our scientific advisors, but we do not intend to conduct any further clinical trials with pimavanserin,” CEO Steve Davis said in a Monday press release. Acadia’s stock $ACAD dropped by 17.41% before the market opened Tuesday.

Pimavanserin, a serotonin inverse agonist and also a 5-HT2A receptor antagonist, is already in the market with the brand name Nuplazid for Parkinson’s disease psychosis. Efforts to expand into other indications such as Alzheimer’s-related psychosis and major depression have been unsuccessful, and previous trials in schizophrenia have yielded mixed data at best. Its February presentation does not list other pimavanserin studies in progress.

The Phase III ADVANCE-2 trial investigated 34 mg pimavanserin versus placebo in 454 patients who have negative symptoms of schizophrenia. The study used the negative symptom assessment-16 (NSA-16) total score as a primary endpoint and followed participants up to week 26. Study participants have control of positive symptoms due to antipsychotic therapies.

The company said that the change from baseline in this measure for the treatment arm was similar between the Phase II ADVANCE-1 study and ADVANCE-2 at -11.6 and -11.8, respectively. However, the placebo was higher in ADVANCE-2 at -11.1, when this was -8.5 in ADVANCE-1. The p-value in ADVANCE-2 was 0.4825.

In July last year, another Phase III schizophrenia trial — by Sumitomo and Otsuka — also reported negative results due to what the company noted as Covid-19 induced placebo effect.

According to Mizuho Securities analysts, ADVANCE-2 data were disappointing considering the company applied what it learned from ADVANCE-1, such as recruiting patients outside the US to alleviate a high placebo effect. The Phase III recruited participants in Argentina and Europe.

Analysts at Cowen added that the placebo effect has been a “notorious headwind” in US-based trials, which appears to “now extend” to ex-US studies. But they also noted ADVANCE-1 reported a “modest effect” from the drug anyway.

Nonetheless, pimavanserin’s safety profile in the late-stage study “was consistent with previous clinical trials,” with the drug having an adverse event rate of 30.4% versus 40.3% with placebo, the company said. Back in 2018, even with the FDA approval for Parkinson’s psychosis, there was an intense spotlight on Nuplazid’s safety profile.

Acadia previously aimed to get Nuplazid approved for Alzheimer’s-related psychosis but had many hurdles. The drug faced an adcomm in June 2022 that voted 9-3 noting that the drug is unlikely to be effective in this setting, culminating in a CRL a few months later.

As for the company’s next R&D milestones, Mizuho analysts said it won’t be anytime soon: There is the Phase III study for ACP-101 in Prader-Willi syndrome with data expected late next year and a Phase II trial for ACP-204 in Alzheimer’s disease psychosis with results anticipated in 2026.

Acadia collected $549.2 million in full-year 2023 revenues for Nuplazid, with $143.9 million in the fourth quarter.

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