What are Headship Rates?

Housing: What are Headship Rates?

by Blanche Evans
Realty Times

According to the National Association of Home Builders, headship rates are the number of people who are counted as heads of households. If you have a roommate, only one of you is counted as a headship. Headship rates are important because they help homebuilders and city planners determine how many households are forming that will need housing.

Headship rates have changed. The most common household is also the most prevalent homebuyer ? married couples with one head of household (48 percent of households,) but in 2005, the number of households headed by singles, single parents, unmarried couples and non-related occupants grew to be the majority of all households (52 percent.)

Single homebuyers were over one-third of the market in 2005.

Between March 2002 and March 2006, the number of households increased by about 1.28 million, but it should have been about 1.4 million. Because of the changes in age in population groups, the headship rate actually went down. More adult men are living with their parents, and more adults are living with siblings and other relatives, possibly due to the high costs of housing, school and other reasons. Headship rates are lower among immigrant populations, but there was a decline among U.S.-born adults as well.

The ages of household occupants matters greatly in determining the future number of households and the types of housing they will need. Headship rates are forecast to go up among people born after 1970, as they move into ages 30 to 44, because as a demographic, this group has historically maintained independent households. Headship rates of Boomers, age 45 to 60 are expected to decline as those born between 1955 to 1970 have historically had low headship rates. Those are among the reasons why headship rates for 2015 are forecast to be lower than those for 2002.

The greatest surge in population occurred in the 1940s and 1950s, peaking in 1957. As the baby boomers came of child-bearing age, another surge in births produced the "echo" boomers, peaking in 1990. Interestingly, a baby bust occurred in the period between 1965 and 1978, otherwise known as Generation X, but households will continue to remain high primarily through immigration into the United States, currently averaging net immigration of about 1.18 million people per year.

Baby boomers have dictated housing products (apartment boom in the 1970s to starter homes in the 1980s, to trade-up homes in the 1990s) in the past, and with an aging population of 55 to 74 increasing to 17 million by 2015, they will continue to do so, influencing "green" homes, universal design, to name a few. But babies born at the peak of the echo boom will have a high headship rate after the age of 25, coming closest to boomers at their peak. They will force demand for apartments and starter homes after 2010.

From 1999 to 2005, the total number of housing units produced were 2.0 to 2.2 million annually, including manufactured housing. Of that, 1.7 million were singlefamily homes, at the expense of rental units.

The trend may modify or reverse looking forward. From 2010 to 2015, single-family homes will slip from their 77 percent market share to about 70 percent.

The number of households is expected to grow between 2006 and 2015 by 1.5 million homes annually, more than any other period besides the 1970s, when baby boomers became heads of households in record numbers, including a peak divorce rate in 1979.

While housing production should pace at about 2.0 million units per year over the next decade, production will be less in the first half of the period, says the NAHB, to absorb excess inventories and to serve a lower establishment of headships for people born in the 1980s.

Blanche Evans is the award winning editor of Realty Times, the Internet's largest independent real estate news service, where she oversees the nation's leading real estate writers and columnists. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR® Magazine, recognized as one of nine "Notables," and was named "Top Reporter Covering the NAR." (Delahaye-Bacon's 2005)