Why Are Millennials Living at Home Longer Than Other Generations?

FT Contributor
A millennial eating Ramen noodles while living at his parents' home.
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Research indicates that nearly one out of every four millennials still lives with their mothers, if not both parents. That equates to over 14 million adults between the ages of 23 and 37 who still inhabit their parents’ dwellings. Some of these have returned to the nest after time spent living away from home while others have never left.

Compared to previous generations when they were at this point in their lives, the number of millennials who are remaining at home is nearly twice as large as the number of  baby boomers or members of the Silent Generation to do likewise. Even when compared to their neighboring Gen Xers, the number of millennials living at home is significantly higher.

The question is, why are so many millennials choosing to stay home with their parents through their 20s and into their 30s?

Reasons Millennials Live at Home

As with most generation-wide questions of this nature, there are actually multiple different factors at play. The three primary concerns that millennials face outside of their parent’s houses are a lack of affordable housing, stubbornly stagnant wages, and crushing student loan debt. Let’s break each one down individually.

Lack of Affordable Housing

The housing bubble burst over a decade ago, helping to kick off the Great Recession in the process. Over the years, the housing market has steadily regained its footing, and as of 2019 the market has seen increasing values for several years.

While this is good news for people whose homes took a heavy hit in value during the recession years, it’s had the opposite effect on millennials attempting to enter the market for the first time.

For a brief period during the early years of the Great Recession, a tax credit was offered to first-time home buyers. However, the credit expired in 2010, and ever since then millennials have struggled to enter the housing market.

The increasing cost of housing in recent years makes this particularly challenging. Home values have appreciated at a robust 6.7% per year, while cost of rent has grown annually at a rate of 3.5%. This puts purchasing a home firmly out of reach for many millennials and even makes paying rent a struggle.

Stagnant Wages

Stagnant wages are dramatically set against the spiking value of the housing market. When put into perspective, wages have barely budged in decades. While the amount being paid to the average worker is much higher than in the early 1970s, the purchasing power of the money involved has barely increased at all.

Another way to look at things is to compare average millennial income to older generations. When set side by side, millennials earn 20% less than baby boomers did at the same age. To add insult to injury, there aren’t any signs of a significant increase in wages for the foreseeable future unless it comes in the form of  government intervention, such as significantly raising the minimum wage.

With less money to work with, it’s more difficult for millennials to reach the same milestones as their predecessors did at the same age.

Student Loan Debt

The third significant factor is student loan debt. Americans collectively have racked up over $1.6 trillion dollars in student loan debt, much of which is currently being paid off by millennials.

With many payments reaching up into the hundreds of dollars per month, any millennial who has chosen to prioritize paying off their student loans may quickly find it difficult to afford a mortgage or even rent a small apartment.

Will Millennials Ever Become Homeowners?

With so many factors working against them, a fair question to ask is if millennials will ever be able to purchase homes at a rate comparable to past generations. While the answer to this question is difficult to truly predict, it’s worth noting that many millennials have already bought homes.

Perhaps there’s truth to the old saying, “Better late than never.” Millennials may be struggling to reach the benchmarks of the past — thanks in large part to the setbacks of the Great Recession and other economic factors that were largely out of their hands. However, they may be simply delaying rather than completely dodging homeownership as they set their financial affairs in order.

In fact, some experts believe the slow momentum towards millennial homeownership is simply a decade-long lull as the generation continues to do things “on their terms.” Getting married late, renting for years on end, and starting families in their 30s has set up millennials for a late foray into the housing market.

If this proves true, when they arrive, they’ll be well-established and ready to upend the market with community-focused, technology-inspired housing expectations that will revolutionize the housing market as we know it.

What Can Millennials Do Now?

So, at the end of the day, is the fact that so many millennials are living with their parents a negative? We think not. With so many financial crises facing their generation, spending significant time living at home may help millennials get their financial act together more quickly. It can allow for:

In addition, all of this can be done with the trusted counsel of an elder who has extensive financial life experience. This combination of factors is enabling millennials to move forward in the wake of the Great Recession with sustained success over the long term.

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