Article from: US NEWS
By: Andrew Soergel | Economy Reporter
May 9, 2016
More than 1 in 5 young adults still live with their parents, according to a new study.
More than a fifth of millennials have yet to move out from under mom’s and dad’s roof – a dynamic that likely made Mother’s Day plans easy to coordinate but doesn’t bode particularly well for the economy at large.
A recent report from real estate hub Zillow estimated nearly 10 million Americans between the ages of 24 and 34 – about 21.4 percent of that age group – still lived with their parents in 2014, based on an analysis of the most recent data from the Census Bureau. That’s up significantly from the 13.1 percent seen as recently as 2005.
About 14.1 percent of 24- to 34-year-olds living at home were unemployed in 2014, and the majority of those who haven’t moved out yet (about 55 percent) were male.
The pool of millennials still living at home varied city to city; more than a third (33.4 percent) of young working-aged adults lived at home in Miami, while only 13.5 percent did the same in Columbus, Ohio.
Considering Miami was estimated to be the 18th most expensive city in the country, according to cost of living and rent indexes compiled by statistics company Numbeo, it’s not surprising that more millennials would be forced to live at home to cut costs. Other high-cost areas like New York City and Los Angeles were also home to a large percentage of millennials living at home.
“With today’s high rents and lagging income growth, many young people are having trouble setting aside enough money to buy their own home, delaying home ownership,” Svenja Gudell, Zillow’s chief economist, said in a statement last week.
But the cost of living only tells part of the story. A little more than 14 percent of millennials lived at home in Denver, which is only slightly cheaper to live in than Miami, based on Numbeo’s analysis. Denver’s cost of living is actually higher than in Riverside, California; Detroit; San Antonio, Texas; and Orlando, Florida – all of which hold a significantly higher share of millennials living at home. This suggests basic expenses are hardly the only dynamic at play in millennials’ reluctance to strike out on their own.
In fact, a recent analysis from Jed Kolko, an independent economist and former chief economist and vice president of analytics at Trulia, found that the “entire increase in young adults living with their parents over the past 20 years can be explained by demographic shifts.”
In his breakdown, Kolko accounts for, among other variables, marital status and presence of children, along with current school enrollment and educational attainment. And on both fronts, he identifies significant societal shifts over the last several years.
“Today’s millennials will leave their parents’ homes as they age – they’re not going to live there forever,” Kolko said. “But (their departure) won’t be the sudden unleashing of pent-up demand we might have expected if the increase of living with parents were only about the housing bust and recession and not about longer-term demographics.”
The median age of American men at the time of their first marriage was around 29 in 2015, according to the Census Bureau. That age hovered around 27 throughout most of the 1990s and early 2000s and is up significantly from the 23 years of age seen back in the 1950s, 1960s and early 1970s. For women, the trend is nearly identical, with the median age at first marriage climbing from about 25 in the late 1990s and early 2000s to 27 in 2015.
Historically, marriage has been a good excuse to move out and either buy or rent a place of one’s own. But with a larger share of Americans delaying marriage later in life, there isn’t nearly as much impetus to leave the nest as has historically been the case.
Educational attainment, likewise, has continued to climb in recent years. Between 2005 and 2013, the percentage of Americans between 25 and 29 years old who had attained a bachelor’s degree or higher expanded from 28.8 percent to 33.6 percent. And those who had obtained a master’s degree or higher climbed from 6.3 percent to 7.4 percent. Considering full-time students have significantly fewer hours in the day to work a full-time job that would allow them to support themselves on their own, Gudell says many have opted to move back home with their parents.
“Living with their parents may allow young people to continue to do things like continue their education, save enough money for first and last month’s rent, or save for a down payment,” she said.
It’s also worth noting that this educational attainment has become increasingly more expensive in recent years – saddling young Americans with hefty student loan payments that may initially prevent them from supporting themselves. In the 2015-2016 academic year, private non-profit tuition costs had ballooned 11 percent over the preceding five years, and that period itself was 14 percent over the five-year-window before that. Public costs, meanwhile, climbed 14 percent and 13 percent, respectively, according to The College Board.
Add to these dynamics the evidence that real wages have stagnated – or even declined– for America’s young adults, and one finds a millennial base less capable of being self-supportive than their predecessors were in generations past.
The economic ramifications of this shift aren’t particularly rosy. National consumer spending is naturally restricted when millions of adults that would historically be buying or renting homes – fueling domestic spending on furniture, utilities and extra food and drink expenses – simply aren’t doing so.
The housing market, likewise, is missing out on a sizeable chunk of would-be homeowners that could help fuel demand for construction jobs. The U.S. homeownership rate dropped in the first three months of 2016 to 63.5 percent – tied for the second-lowest level seen since the 1960s. The rate for those under the age of 35 was a measly 34.2 percent – down from the 43.3 percent seen in the first three months of 2005.
The idea that changing demographics have driven this downturn in homeownership and uptick in young adults living at home is disconcerting, Kolko said. If simple economic functions were driving the shift, some of these trends might resolve themselves on their own. He said parents may want to get used to supporting their children later in life than would historically be the case. The country could be looking at a “new normal.”
“The increase since 2005 is not an aberration; once demographics are taken into account, the aberration is the bubble years of the mid-2000s, when an unusually low share of young adults was living with parents,” he said. “Unless demographic trends reverse, the share of young adults living with parents is unlikely to fall much.”
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