Half Of U.S. Young Adults Live With Parents Due To Financial Instability

A report released by the Federal Reserve Bank shows that nearly half of the young adult population in the U.S are living with their parents – an increase of 25 percent compared to 1999. And it’s not just the boomerang kids, who came back home after finding life outside too much to cope with, many young adults today have not even left home once.

The report shows that 48.8 percent of young adults nationwide aged 25 live at home with at least one parent.

Report authors, economists Charles Gascon and Maria Canon say the main causes for live-at-home young adults are significant student debt (2014 figures show the national student loan debt stands at $1.3 trillion), the continuing uncertain housing market, and weak job prospects, especially for non-college graduates.

The report say individuals at the beginning of their careers often need more time than before to transition into the job market, which is reflected in the 21 to 27 age group having the highest unemployment figures and subsequently being unable to afford to live in their own homes.

Although young adults with a college degree are more likely to live away from home, many are not. Gascon and Canon noted: “An implication is that a significant portion of recent graduates were earning lower wages than what they should have been, given their education.”

They say that the current young adult demographic also started their supposed work life during a recession, when the job market was at its weakest. They cite a study showing those entering the job market during a recession pay a price for about a decade. “That’s because they start work for lower-paying employers and slowly work their way up toward better-paying jobs.”

As the U.S economy improves, the price of housing goes up, which means lowly paid young adults can not afford to pay high rents, yet alone qualify for a mortgage. Gascon and Canon say that since 2012, national house prices have increased 21 percent, with rental prices having grown even faster in many areas. They wrote, “Because most youth would be first-time homebuyers, they have no housing equity to regain from the rebound in house prices after the housing crash.”

The report says the weight of student debt was also discouraging young adults from looking at a mortgage for their own home. A 2014 survey shows more than 50 percent of potential first-time homebuyers said student loan debt was delaying saving for a deposit for a house or apartment.  

Gascon and Canon say a 2015 Federal Reserve Bank of New York survey found that an $10,000 increase in a student’s average debt increases the probability of living with parents by the age of 25 by about 2 percentage points.

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