Generation Y (Gen Y) is not moving — or so calculations based on recent U.S. Census Bureau data indicates. This trend among young adults has continued from the 1980s to today’s Gen Y, with increasing numbers of young adults remaining in their home states rather than moving to pursue loftier opportunities as previous generations did. The number of young adults relocating to other states has dropped 40% since 1980.

This data is surprising, since high unemployment and foreclosure rates are commonly expected to draw those searching for employment to other states with more profitable industries. Instead, young people are staying close to home significantly longer than previous generations have done.

The number of young adults staying at home nearly doubled between the recession periods of 1980 and 2008, according to the Pew Research Center. This trend has likely become even more pronounced during the present financial crisis.

This trend isn’t going to reverse course anytime soon. Children growing up during periods of economic recession are often permanently negatively impacted with a reduced standard of living and risk-averse borrowing by this stunted jobs environment. Informed by recent events, many will be unlikely to take the financial risks their parents did.

Most students who graduate from college during poor economic times will see their wages negatively impacted for as long as 15 years after entering the workforce, per research by economist Lisa B. Kahn. All these factors contribute to the formation of a more cautious generation reluctant to leave their hometowns — or even their childhood homes.

first tuesday take: Gen Y may be currently tethered to their filial homes, but this is only temporary. The lack of employment suitable to college graduates has forced many to remain unemployed, settle for jobs which barely cover monthly student loan payments or continue on with further education and training.

Naturally, such financial obligations are not conducive to immediate homeownership. However, as more jobs are created (an inevitability drawing increasingly closer), college grads will be able to begin saving for a down payment on their future home purchase.

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Though some would have us believe that a buyer less inclined to risky investments is a weak buyer, Gen Y’s caution in real estate transactions will promote long-term stability in California’s real estate, more in conformance with historical real estate ownership fundamentals.

As the housing boom and bust of the 2000s so painfully revealed, high-risk investments do not always turn into high-profit investments – they can also generate big losses. Don’t disparage the circumspect Generation Y; thank lenders that they learn from their parents’ mistakes.

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In the meantime, real estate agents can count on Gen Y to be a huge force in the rental market. As these young adults find employment and build their savings, they will rent for longer periods of time than their parents did in the ’80s. So prepare for an increased number of renters in the immediate future, and the eventual transition of Gen Y into the arena of sales as the next demographic of home buyers.

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The demographics forging California’s real estate market: a study of forthcoming trends and opportunities — Part I


Re: “The Go-Nowhere Generation” from The New York Times