Scratch one more bullish thesis for the housing recovery, and the economic recovery in general.
Over the past several years, optimists had often cited household formation as a key component of pent up demand for home purchases. Recall that last August, the WSJ noted that in a report on the status of families, “the Census Bureau said 13.6% of Americans ages 25 to 34 were living with their parents in 2012, up slightly from 13.4% in 2011. Though the trend began before the recession, it accelerated sharply during the downturn. In the early 2000s, about 10% of people in this age group lived at home.” It concluded, quite logically, that “the share of young adults living with their parents edged up last year despite improvements in the economy—a sign that the effects of the recession are lingering.”
Of course, the “improvements in the economy” were once again confused with the ongoing Fed- and corporate buyback-driven surge in the stock market, which has since been refuted to have any relationship to underlying economic conditions, and instead is merely the key factor leading to record class disparity – a very heated topic among both politicians and economists in recent months.
But going back to the topic of Americans living with their parents, today Gallup reported that 14% percent of adults between the ages of 24 and 34 – those in the post-college years when most young adults are trying to establish independence — report living at home with their parents. By contrast, roughly half of 18- to 23-year-olds, many of whom are still finishing their education, are currently living at home.
While this is an approximation of the Census Bureau’s own results which should be released in a few months, a 14% print in the critical 24-34 age group means that the percentage of college grads (or those otherwise falling into this age group even if uneducated) living in their parents basement has hit a fresh all time high.
As a reminder, this was the most recent visual update from the WSJ as of last year:
Here is what Gallup had to say about this distrubing result:
An important milestone in adulthood is establishing independence from one’s parents, including finding a job, a place to live and, for most, a spouse or partner, and starting one’s own family. However, there are potential roadblocks on the path to independence that may force young adults to live with their parents longer, including a weak job market, the high cost of living, significant college debt, and helping care for an elderly or disabled parent.
A statistical model that takes into account a variety of demographic characteristics indicates that three situational factors are most likely to distinguish the group of 24- to 34-year-olds living at home from their peers:
- They are much less likely to be married.
- They are less likely to be working full time and more likely to be unemployed or underemployed.
- They are less likely to have graduated from college.
Being married may better explain why young adults move out of their parents’ home than why single adults live at home. For those living at home, their situation may have more to do with their job or income status than their marital status. Being single, however, may make living with parents a more feasible option for young adults than it would be if they were married.
Employment status ranks as the second-most-important predictor of young adults’ living situation once they are beyond college age. Specifically, 67% of those living on their own are employed full time, compared with 50% of those living with their parents.
The unemployment rate, as calculated by Gallup, among those in the workforce is twice as high for post-college-aged adults living with their parents as it is for their counterparts who are not living with their parents, 14.6% vs. 7.1%.
The underemployment rate, which combines the percentage unemployed with the percentage working part time but wanting full-time work, is 32.8% among those living at home and 15.4% among those living on their own. In other words, among young adults who live with their parents and are working or actively looking for work, nearly one in three are in a substandard employment situation.
The employment observations are not surprising: after all, one would never voluntarily live with their parents into their thirties, unless one was pathologically lazy and unwilling to branch out on their own of course, if the labor situtation in the economy permitted getting a job which allowed one to at least afford rent.
Neither is it surprising that college grads, saddled with a record amounts of student debt, now well over $1 trillion, or more than the total US credit card debt outstanding, is also crushing college graduate confidence about being able to be cash flow positive once they seek to start lives on their own with the associated cash needs.
However, the marriage observation is more disturbing, and goes to the argument of incremental household formation: namely there is none. In other words, that missing link that at least superficially would provide for some semblance of justification for the rise in house prices that had nothing to do with investor demand and offshore illicit cash laundry using US real estate, is gone.
And while this conforms with Gallup’s own implications of these data, there is more bad news:
A 2012 report from Ohio State University sociologists showed that it is increasingly common for young adults to live at home with their parents. The high costs of housing and a relatively weak job market are key factors that may force, or encourage, young adults to stay at home.… The biggest impetus for leaving home seems to be marriage, easily the strongest predictor of one’s living arrangement among those between the ages of 24 and 34. This indicates that if the marriage rate increases in the future, the percentage living with their parents may decline. Earlier Gallup research suggests that most unmarried Americans do have a goal of getting married someday.
Also, those who have secured full-time employment or have earned college degrees are more likely to have gotten a place of their own to live. An improving job market and economy should lead to a decrease in the percentage of young adults living with their parents.
To sum it up: a record number of college grads are optin not to start a household and instead live with their parents, and just as relevant:
“An improving job market and economy should lead to a decrease in the percentage of young adults living with their parents.“
Considering that the percentage of young adults living with their parents is now an all time high, what does that say about the true state of the job market?
He knows the answer.
via Zero Hedge http://ift.tt/1mh1xiO Tyler Durden