Study Reveals Fallout From Young Adults Who Live With Parents

February 6, 2019

More young adults are still living with their parents and not branching out on their own, and that could have a long-term, negative impact to their finances, according to a new study from the Urban Institute. Researchers found there is no long-term advantage financially for young adults who live with their parents.

The share of young adults aged 25 to 34 who live with their parents rose from nearly 12 percent in 2000 to 22 percent in 2017.

Two men, one younger and one older, walking up stairs

John Moeses Bauan - Unsplash

The trend coincides with a decline in young adults’ marital rates, which during that time has fallen from 55.3 percent to 40 percent. An increase in rents and student debt also is keeping more young adults living at home, the study notes.

But “this early life choice could have long-term consequences,” researchers note in the report about the delay of homeownership. “Young adults who stayed with their parents between ages 25 and 34 were less likely to form independent households and become homeowners 10 years later than those who made an earlier departure.”

Young adults who stayed in their parents’ home longer did not end up buying more expensive homes or have lower mortgage debts later on than those young adults who moved out earlier, the study showed. Urban Institute researchers say this suggests that “living with parents does not better position young adults for homeownership, a critical source of future wealth, and may have negative long-term consequences for independent household formation.”

In fact, adults aged 25 to 34 who lived with their parents were less likely to form independent households and become homeowners even 10 years later compared with those who were renters or homeowners in the same age bracket. Those who became homeowners earlier had lower mortgage debt. Researchers say that suggests those who lived with their parents did not save more to put toward a higher down payment when living at home.

“The sluggish labor market and the increase in housing and education costs following the housing market crisis have encouraged millennials to stay with their parents,” the researchers note in the study. “These shifts may have long-term consequences, as those who live with their parents delay headship and homeownership. Even though they may save some money by extending their stay with their parents, our results show that such behavior could have a negative long-term impact on their wealth. … Housing is still one of the most important tools for building long-term wealth.” Researchers note that those who buy a home before age 25 receive the biggest housing investment returns over time.

Source: 
Young Adults Living in Parents’ Basements,” Urban Institute (January 2019)