Fannie Mae: Millennials Starting to Empty the Nest

Fannie Mae, Washington, D.C., said new data show a growing number of Millennials forming new households.

The company’s monthly Housing Insights Series said (http://www.fanniemae.com/resources/file/research/datanotes/pdf/housing-insights-042717.pdf) despite data suggesting the majority of adults ages 18-34 had yet to cut the residential umbilical cord, new data dispute that contention.

“Recent research depicting Millennials’ stubbornly high rates of living with parents uses a traditional approach to measuring change that, while valid and informative, is not particularly well-suited for identifying shifts in behavior in response to changing economic conditions,” Fannie Mae said. “Typically, changes in living arrangements are measured for fixed age groups…we present an alternative perspective using ‘cohort analysis.’ Here, we monitor the change in the proportion of young adults residing with parents for the same group of young people as they grow older and pass from one age group to the next.”

Such cohort analysis shows the pace at which young adults are departing their parents’ homes actually has accelerated substantially, Fannie Mae said. For young adults aging through their mid- to late-twenties or early-thirties, the reduction in the share living with parents was significantly greater between 2013 and 2015, a period of economic recovery, than it was between 2010 and 2012, when the economy and housing market were still reeling in the aftermath of the Great Recession.

For example, among those young adults who aged from 24-25 in 2013 to 26-27 in 2015, Fannie Mae said the proportion residing with parents fell by 7.6 percentage points, whereas the cohort that passed through the same age range between 2010 and 2012 experienced a decline of only 5.4 percentage points.

“Stronger income growth and an accelerated rate of marriage are likely the two primary reasons why Millennials are starting to leave their parents’ homes at a faster pace,” Fannie Mae said.

Additionally, for cohorts aging through their twenties or early-thirties, Fannie Mae said inflation-adjusted income growth was at least 23 percent greater between 2013 and 2015 than between 2010 and 2012 and at least 81 percent greater than between 2008 and 2010, at the lowest point of the economic downturn. Millennials aging through their late-twenties and early-thirties between 2013 and 2015 also experienced a significantly faster pace of marriage than did their predecessors who passed through the same age ranges during the recession and early recovery.

“Millennials’ accelerated rate of departure from their parents’ homes bodes well for housing demand,” the report said “Cohort analysis shows that the increased pace of leaving home has been accompanied by accelerated young-adult household formation.”