Home Ownership Out-of-Range For Young Adults [AUDIO]
College graduation and 18th birthdays aren’t excuses for children to move out anymore; in fact, more twenty-somethings are staying at home while they figure things out.
A survey from Coldwell Banker found the majority of young adults 18 to 34 said they think it’s acceptable to live with their parents for up to five years after college, and many of them are moving back in with mom and dad.
A survey from Trulia found 44 percent of jobless 18 to 34 year olds live with their parents, as do 25 percent of employed young adults. These young adults who move away for college or immediately after graduation, only to return after being hit by a tough economy are referred to as “Boomerang Kids.”
The lack of young people moving out on their own is having ripples within the real estate market, which is seeing home ownership at 65 percent, the lowest it’s been since 1995 according to the census.
Young adults are being hit hard by the slow economy, notes Rutgers economist James Hughes, which is causing them to delay moving out and starting a life independently.
While young people’s absence in the home buying market is taking its toll on the real estate market, it’s not necessarily all negative news for the economy. Hughes says, by in large, employed young adults who live at home tend to have more discretionary income, which is distributed in other sectors of the economy.
“Rather than spending money on rent, which is not good for landlords, they’re spending it on clothing or they may travel more.”
Psychotherapist Dr. Robi Ludwig points out while the economy certainly has a lot to do with it, she finds young adults increasingly need more time to return home and situate themselves in life.
“This time to return home and get one’s feet on the ground is viewed as the new normal,” Ludwig points out.
While some might remember a generation of parents were told to move out when they were 18, Ludwig says they’re finding parents today are accepting of children returning home in their 20s to stabilize themselves.
“They’re not ready necessarily for that next chapter either, and view their role as parents to make sure their children get ready for the next phase.”
However, Ludwig points out if you don’t want your grown children reverting to teenagers living at home, parents need to make sure the children have an exit strategy; whether it’s saving money, paying off debt, or finding a job.
“When parents can treat this transitional time like real life for their child, then the results tend to be better. Life is not free,” Ludwig says.
Some have concerns not having the rental history will hurt young adults when they do try and get a mortgage. However, Hughes says a good credit history is comprised of many elements.
“If you are working, if you are keeping timely on your credit cards, and are keeping debt down, that credit may be well.”
He points out young adults who are living at home now will not likely be jumping into the housing market right away, but rather going to a rental property.
Hughes notes while home ownership might have lost some of its allure to the younger generation that no longer sees real estate as a cash cow, he agrees the majority of people do want stability especially when they are raising a family, so demand into the housing market will return.
“Home ownership is something that may be achieved when home ownership will be in their 30s,” says Hughes.
He adds it’s important young adults living at home save money because that will give help them when in fact they do try and buy a home.