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)
Young generations were badly hit in the recession, and it could have widespread effects on their lives, from delaying home ownership to starting a family and having children to even one day eventually retiring.
A new study from the Urban Institute shows that those under the age of 40 have accumulated less wealth than their parents did at the same age. That coincides with a time when the average wealth of Americans has doubled over the last quarter-century , according to the study.
“In this country, the expectation is that every generation does better than the previous generation,” Caroline Ratcliffe, an author of the study, told The New York Times. “This is no longer the case. This generation might have less.”
Young adults are facing stagnant pay, a tough job market, soaring student loan debt, and some who did own a home may have faced lost equity or even foreclosure during the housing crisis.
Will younger adults ever be able to catch up?
According to the Urban Institute study, if a person delays buying a home to age 40 instead of age 30, that alone could result in a $42,000 loss in home equity by the time that person reaches age 60.
Still, “strong and sustained job and wage growth would cure many of the ills facing younger workers,” The New York Times reports. “But their delayed or diminished wealth accumulation might still have a lasting impact on their finances.”
Source: “Younger Generations Lag Parents in Wealth-Building,” The New York Times (March 14, 2013)
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