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August 27, 2016

Housing’s Failure-to-Launch Buyer Problem

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Housing’s Failure-to-Launch Buyer Problem

More young adults are living with their parents now than during the recession, according to the latest report from the Commerce Department. 

The number of 18- to 34-year-olds who are living with their parents swelled to 31.5 percent as of March 2015 – that’s up from 31.4 percent last year and up from just 27 percent in 2005.

Read more: Don't Call Millennials a 'Renter Generation'

Many economists have predicted that with an improving economy more young adults would start moving out on their own. In fact, the housing market has been relying on millennials driving new household growth and fueling an upsurge in demand.

Yet, the trend of young adults continuing to live with their parents isn’t likely to change anytime soon, says Jed Kolko, an independent economist and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley.

Kolko says the rise in children living with their parents is likely related to the delay among young adults in marrying and having children compared to previous generations – and is not a direct tie to a weak economy or the housing market.

The increase in young adults choosing to live at home has contributed to the lowest share of first-time home buyers in nearly three decades, according to the National Association of REALTORS®.

“The boost to housing from young adults will come more slowly than people expect,” Kolko says. “The long-term demographic shifts suggest this might be the new normal, with young people living with their parents longer and more permanently delaying household formation and home ownership.”

Source: “More Young Adults Live With Their Parents Now Than During the Recession,” The Wall Street Journal (Nov. 23, 2015)