One-person households on the rise from Les and Elaine

micro-livingLiving alone

All by yourself? You’re in fine company. In fact, singles make up roughly one-in-four households in California, up sharply from just a decade ago when singles consisted of one-in-five households.

The number of married individuals increased for the first time since 2000 in 2013, up insignificantly to 46.2% from 46.1% in the prior year. One-person households, having peaked in 2008, have continued a pattern of modest decline.

The decline in one-person households during the recession is partly due to young people who returned to the nest or took roommates because of the poor jobs market. They’ve since begun to bounce back and single households will likely remain stable as the jobs and housing recovery improves.

Chart update 01/28/15

2013 2012 2010
One-person households 24.3% 24.4% 24.2%
Married individuals

*Census years 2001-2004 are estimates, due to gaps in Census reporting. These estimates are based on reported percentages available for 2000 and 2005.

Single homeowners gain company

It’s easy to assume all of these one-person households are renters. However, increasingly more singles are striking out on their own to become homeowners.

Who are these single homebuyers? Most of them are women. In 2013, for instance, 18% of all homebuyers were of single women, as opposed to single men who made up 10% of all homebuyers nationally, according to the National Association of Realtors.

45% of women over the age of 15 are married in California, according to 2013 Census estimates. However, a higher percentage of men over age 15 are married, at just over 47%. Most significantly, the marriage rate has declined swiftly for both genders, as 51% of women and 54% of men over the age of 15 were married in 2000.

Moreover, while the percentage of one-person households has remained mostly the same since 2009 (increasing throughout the early 2000s), the marriage rate has continued to drop each year. Thus, expect one-person households to resume their rise as we near a full housing recovery, aligned with the recovery of California’s economy and job market. That’s because individuals with incomes are more financially confident to live on their own, without the added security of a roommate, partner or familial aid to help with the bills.

Editor’s note — Jobs returned to their pre-recession number at the end of 2014. However, considering the intervening population gain of 1.2 million, the employment rate is expected to fully recover possibly as late as 2019.

Some will buy, more will rent

Homebuyers are looking a bit more mature lately. While some eager homebuyers choose to skip marriage and become homeowners, many will choose to remain renters in the interim.

After all, renting is often more affordable than buying in the city, where restrictive zoning cause prices to be out of reach for most young singles. Of course, these prices will fall into line with local incomes eventually, but in the meantime it means a languishing homeownership rate, which stands at 54.3% statewide as of Q3 2014.

An older generation of homebuyers is not all bad news, though. Generation Y (Gen Y) is collectively coming of homebuying-age very soon. This demographic group is large, rising by 300,000 individuals from 2008-2012. However, Gen Y had the great misfortune of entering the job market at the outset of the 2008 recession. The goods news is this: as California’s economy heats up in the coming years, rising numbers of (finally employed) Gen Y-ers are expected to add heat to the housing market.

They might be renting now, but those home purchases are coming — in earnest right around 2018-2020.

Smaller homes, lower prices

This demographic shift carries a transformation for the housing market. Foremost is the need for less space. Single-person households don’t require the sprawling suburban homes made popular by the romanticized (and outdated) American Dream – which we no longer hear about.

Second, lower home prices are necessitated by the lower incomes of single households. The median income of California’s nonfamily households (consisting either of one-person households or individuals living with nonrelated individuals) is $40,319 according to 2013 Census estimates. In contrast, the median income of family households (consisting of two or more individuals related to each other by marriage, birth or adoption) is much higher at $68,222.

Of course, family households with children often dedicate much of these additional earnings to the costs of childcare, education and related expenses. However, this does not change the homebuyer’s 31% debt-to-income ratio limit to qualify for a mortgage. Thus, the maximum mortgage amount for which a one-person household can qualify is significantly less than a family household.

Home prices are first and foremost dictated by the incomes of homebuyers. A seller can set the price at whatever they want, but the home will only sell for the amount a buyer is wiling and able to pay. Thus, with the rise in one-person households, home prices are destined to feel downward pressure, particularly mid-tier priced homes.

DRE #00598428
Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed

“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”