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Why are More Millennials Moving in with Mom and Dad?

By now, more and more Millennials were supposed to be cutting the apron strings, living independently from their parents and establishing their own households.

But the opposite is happening.  Five years into the economic recovery, even though unemployment is down, full-time work is up and wages have modestly rebounded, the nation’s 18- to 34-year-olds are less likely to be living independently of their families and establishing their own households today than they were in the depths of the Great Recession, according to the latest Pew Foundation research.

There are more young adults today than there were when the recession hit – the 18- to 34-year-old population has grown by nearly 3 million since 2007. But the number heading their own households has not increased. In the first third of 2015 about 42.2 million 18- to 34-year-olds lived independently of their families. In 2007, before the recession began, about 42.7 million adults in that age group lived independently.

The Pew study found that the declining numbers reflect a decrease in the rate of independent living during the recovery. In 2010, 69% of 18- to 34-year-olds lived independently. As of the first four months of this year, only 67% of Millennials were living independently. Over the same time period, the share of young adults living in their parents’ homes has increased from 24% to 26%.

The surprising Pew data suggests something besides improving income could be at work, and an obvious culprit soaring rents and shrinking vacancy rates, especially in urban markets popular with Millennials.  Rents hit a 47-month high in June and there is no sign yet of softening as large numbers of mew multi-family units come on line (see Rising Rents Hit 47-Month High, June Occupancy Matches Record)

Entry level homes are hard to find.  Strong demand and slim inventories are making driving up prices prides for lower tier housing (see Rising Rents are Backfiring).

Another clue about what’s driving young adults back to mom and dad might be found in a national survey called “The Bank of Mom and Dad” conducted by loanDepot earlier this year (see Bank of Mom and Dad Puts Kids in Houses).  Among parents of Millennials who have recently purchased homes, some 8% said they helped their children to save for down payments by inviting them to move back home.  However, some 22 percent of parents of Millennials who expect their children to buy a home in the next five years said they would invite them back home to save for the down payment.

The Pew study found that in the 18- to 34-year-old population, there has been no uptick in the number of young adults establishing their own households. In fact, the number of young adults heading their own households is no higher in 2015 (25 million) than it was before the recession began in 2007 (25.2 million). This may have important consequences for the nation’s housing market recovery, as the growing young adult population has not fueled demand for housing units and the furnishings, telecom and cable installations and other ancillary purchases that accompany newly formed households.

The decline in independent living since the recovery began is apparent among both better-educated young adults and their less-educated counterparts. For example, today 86% of college-educated 25- to 34-year-olds live independently of their families. In 2010, 88% of this demographic lived independently. A similar 2 percentage point slide in independent living is apparent among 25- to 34-year-olds with no education beyond high school. 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.

Trends in living arrangements also show no significant gender differences during the recovery. However, in 2015, 63% of Millennial men lived independently of family, compared with 72% of Millennial women. But a similar gender difference existed during the Great Recession, and both young men and young women are less likely to live independently today than they were five years ago.

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