Boomerang kids: Nothing wrong with living at home

Written By limadu on Selasa, 13 Agustus 2013 | 05.33

NEW YORK (CNNMoney)

In a survey of 2,000 Americans by Coldwell Banker, young adults ages 18 through 34 said they think it's perfectly acceptable to live with their folks for up to 5 years after college.

"There's been such a shift from generations ago when young adults couldn't wait to leave," said psychotherapist, Dr. Robi Ludwig, who helped conduct the Coldwell Banker survey. "It's mostly the economy. They can't find jobs that will enable them to do that."

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Not only do these boomerang kids think it's okay to hunker down with mom and dad, but many of them are actually doing so. Trulia recently released a survey showing that 44% of jobless 18 to 34 year-olds live with their parents, while nearly a quarter of those with jobs have yet to leave the nest.

The problem is that all of those 20- and 30-somethings living at home has weighed on the housing market's recovery, says Jed Kolko, Trulia's chief economist. With little-to-no track record paying rent or establishing the credit they need for a mortgage, there are fewer first-time homebuyers entering the market.

And that seems to be having an impact. Homeownership, at 65%, is at its lowest level since 1995, according to a recent report from the Census Bureau.

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New household formation, which measures the growth of homes occupied by either owners or renters, has plunged to an annual average of about 550,000 between 2007 and 2011. That's far fewer than the annual average of 1.35 million during the previous five years.

The lag has contributed to a "persistent weakness in the housing market," wrote economist Andrew Paciorek in a Federal Reserve paper.

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According to the therapist, Ludwig, there are two types of boomerang kids: The 'perma-child' who regresses and contributes little to the family and a second type that has an exit strategy.

The latter group lives at home only until they can get on their financial feet by saving up for a home of their own or paying off student loans or other debt.

When the economy gains more traction and demand for workers improves, it could unclog a flood of pent-up demand for housing that these young adults represent.

That could take a while, however, according to Kolko. Jobs are still hard to come by with the unemployment rate among those between 20 and 24 years old at 12.6% in July, well above the national average, according to the Bureau of Labor Statistics. It could take years before young people have built up the savings, credit and economic security to leave the nest, he said. To top of page

First Published: August 13, 2013: 7:07 AM ET


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