Boomerang Economics

For the first time since the late-1800s, there are more young adult Americans living with their parents than with a spouse or partner. In fact, about one of every three people in the 18- to 34-year old age group is living with parents. The tendency to move out of the family home for a while but then come back has led to the use of the phrase “boomerang generation” to describe the phenomenon. The social and economic implications are significant.

Data from the US Census Bureau indicates that the proportion of young adults living in the parental home has increased markedly over the past decades. Although the trend had leveled off to some extent through much of the 1980s and 1990s, it began to escalate in the early 2000s. Men are significantly more likely to live with parents than women, as are persons with lower income, more debt, and less education. There is some variation by race/ethnicity. Census data on young adults living in the parental home indicates that the Texas proportion is slightly lower than the national average.

Household formation drives demand for housing and new home construction, which can be a significant source of economic stimulus. In addition to construction, major purchases are involved such as washers and dryers, refrigerators, lawn mowers, and more. Minor purchases that add up over time include all of the other items used in a house from towels to furniture to tools to decorative items. A spectrum of services may also be required such as landscaping, cleaning, maintaining, and improving.

Purchases related to running a home not only generate economic activity, but also tax receipts. In addition, houses are an important aspect of the property tax base. Fewer houses means less economic activity and lower resources for state and local governments. Although some of the young adults are only delaying setting up their own residence, the changing living arrangements nonetheless have economic fallout.

In part, the recent trend reflects a reversal of homeownership increases prior to the Great Recession, when a booming housing market and easy credit encouraged (often inappropriate) purchasing. When the real estate bubble burst, many Americans found themselves stuck with more house than they could afford and few options for relief.

The recession led to the elimination of hundreds of thousands of jobs month after month. During the six month period from November 2008 through April 2009 alone, nearly 4.5 million US jobs disappeared, and recent college graduates and other young adults were challenged to find work of any kind. Against this backdrop of a crashing real estate market and few jobs, living with parents became a matter of financial survival for many young people.

In some areas, rents have risen rapidly, and affordability has become a major issue. Another factor influencing the tendency to avoid setting up a household is the high debt loads some young people are dealing with. The student loan problem has made many headlines (though most individuals are able to manage their payments and the ‘crisis’ rhetoric is often overblown); credit card debt and other obligations can also impair the ability to fund a household.

A recent study by the Pew Research Center examined the trend in detail. According to the analysis, the proportion of young adults (18- to 34-year-olds) living in parent(s)’ home increased from 20% to about 32% between 1960 and 2014. Over the same period, there was a dramatic decrease in the percentage of young adults who are married or cohabiting in their own household, which dropped from 62% to less than 32%. The numbers living alone, as single parents, or other heads of households rose from 5% to 14% as a percentage of the total, while other living arrangements increased from 13% to 22%.

Clearly, economics explains part of the trend, and improvement in the job market may slow the increase. The fact that it’s so commonplace also enters into the decision process, as both parents and young adults become more accustomed to the idea in general and are more open to the option.

However, there is an argument that the biggest factor—avoidance of marriage—is a social change that may be here to stay. In 1960, the proportion of young adults married or cohabiting in their own household peaked at 62%. Another Pew Research Center study reports that in 2012, one of every five adults ages 25 and older had never been married, up from fewer than one in 10 in 1960. The median age at first marriage had risen to 27 for women and 29 for men, up from 20 for women and 23 for men in 1960.

Views regarding the importance of marriage are clearly changing. Women have far more career options than in 1960, and are thus less financially dependent on finding a spouse. Without marriage as an impetus to setting up a household, living with parent(s) is an alternative young people are more inclined to select. In many cases, both parents and child are happy with the arrangement, which can be financially (and otherwise) attractive for all parties involved, particularly if the child shares expenses or pays rent (or foregoes parental subsidies that would otherwise be necessary).

We may continue to see large numbers of young adults living with parents regardless of economic performance or job prospects. It is a social trend that goes beyond purely financial considerations and one that has significant implications for the overall economy.