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“Boomerang” a Drag on Housing

housingWe read with interest that an increasing number of young adults are “boomeranging” back to live with their parents, according to a new study by the Bureau of Labor Statistics. There are some real underlying economic – and sociological — factors that likely contribute to that phenomenon, said AIER’s senior research fellow, Polina Vlasenko.

The BLS analysis found that by age 27, about 90 percent of young adults born between 1980 and 1984 had left their parents’ homes at least once, and more than 50 percent of them had moved back in at some point after moving out.

Although the Baby Boomers would not have done it themselves, it’s no longer considered strange for grown children to be relying on their parents into their late 20’s, Vlasenko said. It’s a cultural shift, she said – but there are also economic reasons about why the children would need the help, she said. “The labor market has been brutal for the last five or six years,” coming out of the recession, and the people new to the workforce have felt the brunt of the impact, she said.

That first job out of college, the one that doesn’t pay all that well, has still been generally attainable, she said. But it’s that second job, the first promotion that helps a young adult stand on his or her own two feet, economically speaking – that’s become tougher to find, she said. That’s because the relatively inexperienced newcomers are competing with people in their 40s and 50s who are out of work and willing to work for less, she said.

That has had an effect on the overall economy as well, she said. As people split off from their parents and form households of their own, they spend on housing, furniture, appliances, cars, even things as inexpensive as curtains, bedding and tableware, she said. If young people continue to live with their parents longer, even as wages increase, it could be a drag on the housing market, she said.

“We might be moving to a permanently slower rate of people separating from their parents,” she said. “There’s only one way to know. Wait 10 or 15 years.”

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