Millennials: forever renters or just delayed homeowners?

July 25, 2014

The White House wants to help you move out of your parents’ basement. That was the message from Jason Furman, the chairman of the White House’s Council of Economic Advisers, at the Zillow Housing Forum in Washington yesterday.

Here are the basics: housing is a big driver in the U.S. economy. Young people aren’t buying houses during the recovery at as high a rate as they did historically, which is at least part of the reason that the housing recovery (and thus the great economic recovery) from the Great Recession has been sluggish. The question is why, and to what extent will this trend become permanent?

The takeaway from Furman’s speech is that the White House is worried about what these trends mean for the economy, but it doesn’t think it’s a permanent situation. Policy-wise, says Furman, making sure young people graduate from college (if they start) and can find steady jobs is the best way it can help this situation.

This isn’t the easiest chart in the world to read (note that the right y-axis is inverted), but it shows that there’s some correlation between the headship rate — essentially how many people aren’t living in their parents’ basement — and the unemployment rate. Loosely speaking, when people can’t find jobs, they move back in with their parents.

You need a job to move out... shocking I know

Furman noted there are a lot of other factors that contribute to the secular decline of homeownership among young people today, but the most important one is probably increasing education rates. That in turn is a factor in two different trends that could be keeping young people from buying homes: high student debt loads and delayed marriages. However, neither of these problems mean young people won’t eventually become homeowners if they have steady jobs and access to credit — they’ll probably just have to wait a little longer.

“There is no strong reason to believe that millennials are dramatically different than the generation of Americans that preceded them,” says Furman. It’s too bad it will probably be another decade before we find out if that’s true or not.

7 comments

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What makes the White House think millenials want to get out of their parents’ basements? They are “comfy-cozy” there with their tech-toys and paying no rent.

Posted by MonitorLizard | Report as abusive

The first sentence says: “The White House wants to help you move out of your parents’ basement.”

The rest of the story explains why the situation of people living in their parent’s basement is bad for housing and bad for the economy. I don’t see the explanation of how the White House plans to “help” these people???

Maybe the key phrase is “wants” to help? Even though there is no real plan in place? Sort of like: I “want” to be rich and famous someday.

Posted by nose2066 | Report as abusive

My opinion on the why is that off-shoring of what used to be good paying jobs has dramatically reduced wages in the U.S. to the point where Millennials cannot afford to buy a house on their now meager earnings.

Sending jobs overseas is great for stock and stockholders, but terrible for the economy as a whole. These are simply unintended consequences of globalization, but our newly religious corporation-persons don’t care.

Posted by gregbrew56 | Report as abusive

Forever renters? It’s what happens to “instant gratifiers”. They can’t afford the down payment for a house, but they’ve got the latest iPhone and big screen TV…

Posted by ReadandShare | Report as abusive

young people have lived through a massive collapse in home prices. the shock that caused for their parents will be with them for a long time. also homes are way over priced in relation to average income.really really expensive.

Posted by dennyboy1 | Report as abusive

It depends on whether household income recovers. It dropped 43% from 2007 to 2013. And is SLOW to rebound.
https://confoundedinterest.wordpress.com  /2014/07/27/why-the-housing-recovery-ha s-been-so-muted-median-us-household-weal th-has-fallen-43-since-2007/

Posted by Snakeeyes4412w | Report as abusive

To get a House or a nice apartment, A good paying job is the first step. This White House is full of people with no clue on how to make that possible. Their ideology mandates cynicism and hostility to the private sector. Distrust of employers and rabid anti growth environmentalism. The root cause of this seems to be the willingness to de humanize anyone with a different opinion on how to move forward. The first step should have been recovery of the job market. The big driver in that has been energy, Oil in North Dakota, Gas in Pensylvania, and the XL pipeline. While permits and development on public land has fallen, the private sector has produced jobs and economic growth. Without those activities hated, with every fiber of the liberal mind, we would be in a recession. Jason Furman was the source of the idea that loosing your full time employment was actually a good thing because you could persue your dreams. News outlets still print his crazed mutterings!

Posted by DennisVictor223 | Report as abusive