22% of young adults aged 23-37, known as Millennials, are still living with their parents as of 2017. This is a significant increase from the 13% of young adults who lived in their parents’ houses in 2000.
In Los Angeles and the Inland Empire, the rise in young adults living at home has been even more extreme, rising:
- in Los Angeles, from 16% in 2005 to 30% in 2017; and
- in Riverside, from 15% in 2005 to 33% in 2017, according to Zillow.
Other parts of California have experienced a rise closer to the nationwide average, increasing:
- in Sacramento, from 11% in 2005 to 21% in 2017;
- in San Diego, from 11% in 2005 to 22% In 2017; and
- in San Francisco and San Jose, from 12% in 2005 to 21% in 2017.
Jobs, student debt hold back Millennials
There is no single reason why the share of young adults living at home has increased over the past two decades, but a big part is rising housing costs relative to incomes and debts.
Home prices and rents have increased significantly since the recovery from the 2008 recession. In every corner of California, it’s impossible for the average young adult to qualify to pay an average rental price on their own — they need to move in with others. When considering the options for young renters are to move in with roommates or move back in with parents, it’s no wonder so many are choosing the comforts of home, which may come at zero cost to themselves.
Jobs after the 2008 recession were slow to return, and incomes even slower to rise. The hardest hit were young adults just entering their careers. Many newcomers to the job market who otherwise would be taking their first career job instead took part-time or freelance gigs, if they could find work at all. This led to a delayed entry into their career field, reflected in their reduced incomes.
In California, the number of jobs held at the outset of the 2008 recession did not catch up until 2014. But when counting the interim population increase of 1.8 million working-aged individuals, the real jobs recovery has yet to occur in California. It will likely arrive in 2020.
Another reason why Millennials are unable to move out of their parents’ homes is the high levels of student debt they carry. The combined amount of student loan debt has increased roughly 300% since 2005, according to the Federal Reserve Bank of New York’s (FRBNY’s) Consumer Credit Panel. The average 25-year-old student loan borrower owes about $22,000 in student loans, according to a report published by the FRBNY.
When young adults are stuck paying hundreds of dollars a month paying back their college tuition, qualifying to pay rent (let along buy a home) can be difficult or impossible in California where housing costs are extremely high.
As a result of the slow jobs recovery and a bigger chunk of their paycheck going toward paying off debts accrued during the long recovery, vulnerable young adults have been forced to take extreme measures to save money, including staying in the nest longer than in years past.
Still, real estate professionals shouldn’t be too quick to discount this population as future clients. Young adults who live at home longer may be able to save up for a future down payment faster than similar-aged renters. In fact, some may have this explicit goal in mind by living at home rent-free.
Agents: remember to include these young adults in your marketing plans for first-time homebuyers. They have been slow to enter the housing market for now, but that doesn’t mean they won’t be ready to buy soon.