Report: Young Adults Continue to Lag Household Formation

You know that whole “household formation” demographic that’s supposed to revitalize the housing market? It just might have to wait a little longer.

The Pew Research Center, Washington, D.C. said broad demographic shifts in marital status, educational attainment and employment have transformed the way young adults in the U.S. are living. In a new report (http://www.pewsocialtrends.org/files/2016/05/2016-05-24_living-arrangemnet-final.pdf), Pew said in 2014, for the first time in more than 130 years, adults ages 18 to 34 were slightly more likely to be living in their parents’ home than they were to be living with a spouse or partner in their own household.

The report, For First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds, said turn of events is fueled primarily by the “dramatic drop” in the share of young Americans who are choosing to settle down romantically before age 35.

“Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner, whether a spouse or a significant other,” the report said. “This type of arrangement peaked around 1960, when 62% of the nation’s 18- to 34-year-olds were living with a spouse or partner in their own household, and only one-in-five were living with their parents.:

By 2014, 31.6% of young adults were living with a spouse or partner in their own household, below the share living in the home of their parent(s) (32.1%). Some 14% of young adults were heading up a household in which they lived alone, were a single parent or lived with one or more roommates. The remaining 22% lived in the home of another family member (such as a grandparent, in-law or sibling), a non-relative, or in group quarters (college dormitories fall into this category).

Among young adults, the report said living arrangements differ significantly by gender. For men ages 18 to 34, living at home with mom and/or dad has been the dominant living arrangement since 2009. In 2014, 28% of young men were living with a spouse or partner in their own home, while 35% were living in the home of their parent(s). For their part, young women are on the cusp of crossing over this threshold: They are still more likely to be living with a spouse or romantic partner (35%) than they are to be living with their parent(s) (29%).

In 2014, more young women (16%) than young men (13%) were heading up a household without a spouse or partner. This is mainly because women are more likely than men to be single parents living with their children. For their part, young men (25%) are more likely than young women (19%) to be living in the home of another family member, a non-relative or in some type of group quarters.

“A variety of factors contribute to the long-run increase in the share of young adults living with their parents,” the report said. “The first is the postponement of, if not retreat from, marriage. The median age of first marriage has risen steadily for decades. In addition, a growing share of young adults may be eschewing marriage altogether.”

In addition, trends in both employment status and wages have likely contributed to the growing share of young adults who are living in the home of their parent(s), and this is especially true of young men, the report said. Employed young men are much less likely to live at home than young men without a job, and employment among young men has fallen significantly in recent decades. The share of young men with jobs peaked around 1960 at 84%. In 2014, only 71% of 18- to 34-year-old men were employed. Similarly with earnings, young men’s wages (after adjusting for inflation) have been on a downward trajectory since 1970 and fell significantly from 2000 to 2010. As wages have fallen, the share of young men living in the home of their parent(s) has risen.

The Great Recession (and modest recovery) has also been associated with an increase in young adults living at home. Initially in the wake of the recession, college enrollments expanded, boosting the ranks of young adults living at home. And given the weak job opportunities facing young adults, living at home was part of the private safety net helping young adults to weather the economic storm.

Other key findings:
–The growing tendency of young adults to live with parents predates the Great Recession. In 1960, 20% of 18- to 34-year-olds lived with mom and/or dad. In 2007, before the recession, 28% lived in their parental home.
–In 2014, 40% of 18- to 34-year-olds who had not completed high school lived with parent(s), the highest rate observed since the 1940 Census when information on educational attainment was first collected.
–Young adults in states in the South Atlantic, West South Central and Pacific United States have recently experienced the highest rates on record of living with parent(s).
–With few exceptions, since 1880 young men across all races and ethnicities have been more likely than young women to live in the home of their parent(s).
–The changing demographic characteristics of young adults–age, racial and ethnic diversity, rising college enrollment–explain little of the increase in living with parent(s).

But there is hope. A more recent report from the Mortgage Bankers Association, Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households, projects nearly 16 million households in the U.S. housing market by 2024, which should lead to much greater demand for both renter- and owner-occupied housing.

The paper (http://mba.informz.net/MBA/data/images/15292_Research_Growth_White_Paper.pdf) said as economic conditions continue to improve and Millennials and Generation Y cohorts mature, the next decade could be among the strongest the U.S. has ever seen.

“Household formation has been depressed in recent years by a long, jobless recovery,” the MBA study said. “Favorable economic and demographic trends will combine to create strong growth in both owner and rental housing markets. The precise mix will depend on the degree to which consumer choices, the relative cost of owning vs. renting and government policy’s impact on access to credit favor one or the other.”