Sunday, August 9, 2015

New Home Starts Impacted by Adult Kids Not Leaving Home

Just as baby boomers are honing their retirement strategies and considering downsizing because of their new empty nest, American homes are getting a little more crowded.

The Great Recession prompted many millennials, those between 18 and 34, and even older adults, to move back with their parents because of job loss and financial difficulty. In fact, there's been a surge in retirees who forget downsizing as many homeowners go bigger to make room for their loved ones.

This one factor alone will mean hundreds of thousands of smaller homes designed for Boomers in their retirement will not be built and the trend isn’t abating.

Many of the kids who moved back in at the height of the crash haven't moved out, and now even more are moving back home, even though the economy has improved and the unemployment rate has dropped so that now the empty nest isn’t so empty.

While the population of millennials has grown by three million people over the last eight years, there are fewer that are the heads of their own households.

What that means is that 42.2 million millennials head households compared to 42.7 million in 2007. Since 2010, the percentage of 18- to 34-year-olds who live with their parents has risen from 24 percent to 26 percent. It was only 22 percent in 2007 before the Great Recession.

This is despite the fact that the jobless rate fell from 12.4 percent five years ago to only 7.7 percent today. Their income is also up slightly since then.

If this trend continues, the housing industry will not see the growth needed to be the big economic factor it once was. Economists are watching this closely because if millennials stay at home and don't buy a house or condo, that's going to hold down the growth of the housing market. What happens to the housing market impacts furniture stores and other industries that service the housing market, too.

It shows that 86 percent of those with college degrees live independently of their family compared to 88 percent five years ago and 90 percent in 2007. It's the same two percentage point difference for those without a college education over the last five years, but only 75 percent of those with a high school education live independently.

This suggests that trends in young adult living arrangements are not being driven by labor market fortunes, as college-educated young adults have experienced a stronger labor market recovery than less-educated young adults.

Wages still haven't returned for non-college educated group to where they were before in 2008 at $592 a week. It has only rebounded to $574 a week in 2015 after reaching a low of $547 a week in 2012.

Student loan debt is also an issue pushing kids back home.

While more and more adult children have moved back home, it doesn't mean they're sitting on the couch and hanging out. Many of those who moved back home have enrolled in college to better position themselves in the job market.

Education is important because 51 percent with a bachelor's degree head a household compared to 43 percent of those with a high school education only. In 2007, it was 54 percent for those with degrees and 46 for those with high school only.

1 comment:

Chuck Owings said...

I've seen this trend and move the 'Baby Boomers" looking for smaller single level living homes toward Cape Cod models. This allows them to have what they want as well as a second level for those returning millennials if need be. Either finished or unfinished second levels for them. This allows some level of privacy beyond the typical 2 story home with all the bedrooms on the second level. Until the millennials come back and after they leave, you can have the upper level zoned and basically shut it down when not in use. Makes all the sense in the world.