When Will the Kids Finally Move Out For Good?

In the good old days, about 40 years ago, the number of young adults living with their parents was about 8%. At 17% today, it’s more than double, according to a new analysis by the National Association of Realtors. That’s still the second highest number since 1960 after the 17.8% during the first year of the pandemic.

That’s got many in CRE scratching their heads and wondering, aside from the parents, when the kids will finally leave home.

During the pandemic, many people in general decamped from office to their apartments, and even further out to the suburbs and small towns. But many younger people went back to mom and/or dad. Maybe it was to cut down on rent, possibly because of losing a job or going back to school, and even partly to have people around to talk to.

In theory, living at home will let them save money that could go toward a down payment on a house. According to NAR, between 21% and 23% of first-time buyers are going directly from living with family to their own home without an extended stop in rental housing. The percentage between 1989 and 1995 ranged between 12% to 15%.

NAR estimates that roughly half of those adult children are paying some rent to their parents, although there’s no way to tell whether the figures reflect fair market value, let alone a share of utilities and groceries.

Even paying rent to the ‘rents, assuming it probably is below market, leaves them in good shape, as 38%  say they got closer to paying down student debt. 

In other words, they could get in a good position to save for a house. And as NAR notes, they would also get an important advantage in flexibility. The typical listed home gets 3.8 bids, meaning more competition and likely a longer path to ownership. If you’re back at the old homestead, then there’s less pressure from a lease that might need renewal if your bid doesn’t take.

Then again, this is only one part of the whole picture. There have been studies suggesting that the number of millennials, who have the lowest (47.9%) homeownership rates of any other older generation, who have decided that they would rent forever hit 12% last year. Also, Gen Z and millennials are moving back to gateway cities with prices that make ownership even more difficult.

It will be some time to see if the kids are alright—as well as the real estate professionals who want to sell them homes.