Young People Moved Home, But Now are Moving Out
The adages of young adults living in their childhood bedroom, above the garage, and in the basement have all rung true in the last two years. The good news for parents is that young adults seem to now be boomeranging back out of the nest.
In 2022, 15.6% of young adults aged 25 to 34 lived at home with family. In 2020, the share of young adults aged 25 to 34 living at home grew to the highest share recorded since 1960, 17.8%. Historically, between 1960 and 1980, the share of 25- to 34-year-olds living at home was less than 10%. Some young adults may have recently moved home due to the flexibility of remote work trends and to avoid paying high rents. Others may be at a family member’s home due to job losses or while obtaining higher education virtually. Regardless of the reason, this may provide a benefit to potential first-time home buyers.
It is possible that moving home allowed these young adults a financial boost that they would not have had otherwise. It could have translated into savings, paying down existing debt, and working on their credit score and debt-to-income ratio. Among student debt holders, 6% cited that the pandemic allowed them to pay off their student debt earlier or get closer to paying it off directly because they moved in with family and avoided having to pay rent. For some, it may have even allowed them the ability to save for a downpayment on a home.
When examining the trends historically, first-time buyers are most likely to rent before purchasing a home. This year the share of buyers that rented before buying remained the majority at 64%. But the share moving from a family member’s home shows a sizeable growth from 21% in 2021 to 27% in 2022. Since 2016, however, there has been an elevated share of buyers who are moving directly from a family member’s home and into homeownership. This compares to 12% to 15% between 1989 and 1995 when NAR first started collecting the data series.
For first-time buyers who lived at home first, about half are making rent payments to family. NAR does not collect whether or not this is fair market value rent, compared to simply contributing rental payments that may cover their share of utilities or groceries. By household composition, it is more common for single women and married couple first-time buyers to live with family before purchasing.
While living at home may not be an ideal, or even a long-term, scenario for many families, if prospective first-time buyers can move home before purchasing, this might financially help them save to purchase a home. The added flexibility of living with family allows a buyer to navigate the tight housing market with a limited affordable housing inventory. National months’ supply stands at just 2.9 months in December of 2022, and 57% of homes are selling in under one month. A potential buyer has the ability to wait for a more ideal home to enter the market that fits their needs.
While this option is available for some young adults, it does speak to a larger trend in the housing market. Those who can take advantage of willing family members to open their door, and those who cannot. As many workplaces transition to more in-office workdays from remote days, this could narrow the ability for many young adults to use this as a savings vehicle for their future homes.