Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005.
As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who are now looking for a household of their own that who were previously living with their parents.
A recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade.
First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. For existing-home sales, first-time buyers’ share is less than one-third of all buyers, at 27 percent in May, according to the National Association of REALTORS®.
The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been a fraction of that, about 500,000 to 700,000 a year.
“We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.”
Source: “First-Time Buyers and New-Home Demand: Reverting to Normal,” Builder (July 10, 2014)