They have been called the “boomerang generation”, the “failed fledgelings” and the “parasite singles”. But now there’s another term for young adults in American still living with their parents — the movers.
A number of 18 to 35-year-olds, who moved back to the parental home, or never left, when the financial crisis hit, are setting up their own home, providing a welcome boost to the US housing market
“We can expect that half a million extra households will be formed each year because of this. It will help take overall numbers back to pre-crisis levels and provide a nice lift to the market,” Ed Stansfield, chief property economist at Capital Economics, said. “It’s another step to putting the American housing market back to more normal conditions.”
Between 2003 and 2013, the proportion of American 18 to 34-year-olds living in the parental home rose from just over 26 per cent to a peak of 32 per cent as credit tightened after the 2008 financial crisis and the ensuing recession hit the wages and jobs of the millennial generation, at precisely the same moment that student debt levels hit record highs.
This was not just an issue for young adults. It hit other ages too. Census Bureau figures showed a 2.4 million jump in the overall number of shared households over the same period.
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But young adults attracted the most attention, giving rise to a prolonged period of national hand wringing, not all of it fair or rational. Was it a sign of a “failure to launch” by a coddled, infantilised and lazy generation? Or was the phenomenon a rational response to a radically different, confusing post-industrial economy, as Jeffrey Jensen Arnett, a psychologist at Clark University more optimistically put it?
Mr Stansfield said there are signs that the boomerang trend is reversing, thanks in part to a stronger labour market. “Over the next few years we think that the share of young adults living at home is likely to fall quite substantially,” he said.
That will not only help boost yields on residential rental properties, to about 4.5 per cent by the end of this year, as young adults start renting again, but it will also help drive owner occupation as competitive pressures in the mortgage market lead to a loosening of credit.
However, he did not think the trend would cross the Atlantic to Britain, where the boomerang generation can expect a few more years under their parents’ wings. In the run up to the 2007-08 housing market crash in the US, banks made poor loans but the real relaxation was in loan-to-value standards. In the UK, however, the change was in how much money homebuyers could borrow.
“In America, home ownership is more accessible; not only are mortgage rates low but the value of homes is more likely to be in line with young adults’ income,” he said. The latest Case Shiller house price index, published last month, shows that average home prices in American cities are back only to their autumn 2004 levels.
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Mr Stansfield said that he did not share the concerns of some analysts that the recovery in the US housing market could be slowed by a flood of Baby Boomers selling their big family homes and moving to retirement communities at the same time. Instead he expects a trickle, as the Baby Boomer generation staggers its home sales, with some continuing to work well past retirement age and staying put.