High unemployment among young adults is prompting a big loss in household formation that is critical for long-term housing demand, according to housing experts.
Of 25 to 34 year olds, about 75 percent were employed in September; that’s about the same as year-ago levels and near the levels during the recession, The Wall Street Journal reports.
Young adults who are unemployed are mostly opting to live with their parents and aren’t renting or owning their own place. Indeed, the number of adults under the age of 35 who are living at home is at the highest level since 1981. More than 30 percent of those aged 18 to 34 are living with their parents. The typical average is 28 percent.
As young adults put off home ownership, the number of first-time home buyers continues to be constrained. The National Association of REALTORS® reported Monday that first-time home buyers accounted for 28 percent of home purchases in September — down from 32 percent in September 2012.
But when young adults do get off the sidelines, it could prove a big boost to home sales.
“Assuming consistent population to household ratios and home ownership ratios, the 1.8 million individuals currently living at home would translate into an additional 590,000 households and roughly 200,000 additional home owners — roughly a boost of about 4 percent to the projected level of sales in 2013,” according to NAR’s Economists’ Outlook blog.
Source: “Did You Know: Pent Up Demand Among Young Adults Could Boost Home Sales by 200,000,” NAR Economists’ Outlook (Oct. 1, 2013) and “Employment Shows ‘Missing Households’ Still Weigh on Housing,” The Wall Street Journal (Oct. 22, 2013)