Millennials: forever renters or just delayed homeowners?
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.
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.