Explaining why the housing crisis doesn't improve

Economist Karl Case (the one from the widely followed Case-Shiller housing index) says that a big part of the story is the sharp slowdown in the number of household formations since the recession. From NPR:

Household formation is about one-third of what it normally is. And Case says this is part of the story about why the housing market is so weak. "People are doubling up," he says. "They're staying with Mom and Dad," and immigration is down. Case says problems in the housing market can even affect marriage and divorce rates. "There's actually a new paper in the American Economic Review this month that finds the marriage rate sensitive to changes in house prices," Case says. "So this decision to form a household is a major component of demand."

The general thinking is that sooner or later this will turn around - that people will want to (or be forced to) move out of their parents' basement; or that they'll eventually get married and want to buy a home. In fact, it could be argued - quite persuasively I think - that the longer there is this pent-up demand, the more robust the bounceback will be. Economist Nariman Behravesh says the housing market could start to pick up quite a bit by next summer, though other economists say it'll take longer than that.