Debt explains millennial tendency to move home


There is a particularly well-known stereotype about lazy millennials: overweight, underproductive and highly introverted young adults living in their parents’ basement. Parts of this stereotype unfortunately ring true, although the preconception applies now to more than just the exceptionally lazy. According to a Pew Research Center poll, 39 percent of young adults ages 18 to 34 with only a high school diploma live with their parents. 19 percent of college graduates in the same age bracket live in similar conditions. These results, according to the Pew Research Center, represent the highest rate of young adults sharing residence with their parents since the Great Depression.

It goes without saying that there is more to the story than accusations of laziness. Socioeconomic factors contribute as significantly to the housing trends today as they did in the 1930s. When adjusted for inflation, average wages for men in the young adult bracket have fallen 34 percent in value from 2000 to 2014. At the same time, metropolitan centers that play host to increasing numbers of young adults, like San Francisco, have experienced rent 10 percent or over  annual rent increases in recent years. This has the compounded effect of making housing far more difficult to afford for the average millennial, just as similar factors did during the Great Depression. Interesting to note, however, is that unlike during the Great Depression, it does not appear that large-scale unemployment is to blame. Unemployment was at 14.6 percent in 1940; it was at 6.2 percent in 2014 – very nearly at pre-recession levels. It is clear that finding a job is easier now than then, despite similar housing statistics for people over the age of 16.

A defining characteristic that sets the present apart from the past is student debt. According to research done by the Federal Reserve Bank of St. Louis, over half of first-time home buyers in 2014 claimed that student loan debt delayed saving for a down payment. The same report noted that for a $10,000 increase in student debt, the probability of living with parents or other family members by the age of 25 increases by about two percentage points. Combine that statement with these facts: while under 50 percent of students took out loans in 1993, just over 70 percent did in 2015. The average debt incurred by each individual’s loans has increased threefold in the same timeframe. For further comparison, in 1993, students and parents amassed roughly $7 billion in student loans. Despite a college student body that was over 70 percent of the size of 2015’s, students and parents had accumulated a combined debt in 2015 that was about ten times the value of 1993’s figure. The resulting conclusion is that the numbers appear to be stacked against millennials, at least as far as finances go.

Taken in total, it genuinely seems that young adults of this generation have it harder in financial terms than the graduates who preceded them. One could chalk it up to laziness, but the facts in this case disagree. A much more likely cause is high levels of student debt coming out of college that is financially debilitating to those trying to move away from home or go to buzzing centers of potential employment. It is not the millennials themselves who are to blame for this specific trend; it is instead the combination of several factors that work against them when trying to find affordable homes in desirable areas. It is little wonder, then, that people who come of age in the 21st century decide to pursue cheaper housing – even at the considerably high cost of having their mothers as their landlords.