Did You Know: Pent Up Demand Among Young Adults Could Boost Home Sales by 200,000

• In 2012, there were more than 71 million young adults aged 18 to 34 living in the US—more than the roughly 69 million when the baby-boomers were in this age group in the mid-1980s.
• The share of adults under age 35 living at home, especially among those aged 25 to 34, is at the highest level since 1981. More than 30 percent of those 18 to 34 lived with parents [1]; the historical average is 28 percent.
• The share was 13.6 percent among those aged 25 to 34. The historical average for this group is only 11.7 percent. While a 2 percent difference sounds like a small amount, this translates into roughly 800,000 individuals.
• The share among those aged 18 to 24 was 56.2 percent compared to a 52.9 percent long term average. This translates into roughly 1 million individuals.
• At the same time, nearly 26 million households were headed by those under age 35. This group has a homeownership rate that has declined dramatically from its peak of over 43 percent in 2004 and 2005. In 2012 the homeownership rate was roughly 37 percent—the lowest level since publication of this data in the early 1980s.
  
• Breaking it down further, households headed by those aged 25 to 34 have a homeownership rate of 41.5 percent compared to 21.7 percent for those under 25. While both rates represent a decline from recent years, ownership rates for those households headed by an individual under 25 actually remain above the long-term average of 19.6 percent. For those aged 25 to 34, however, the current homeownership rate is at an all-time low, well below the 45.8 percent historical average.
• Assuming consistent population to household ratios and homeownership ratios, the 1.8 million individuals currently living at home would translate into an additional 590,000 households and roughly 200,000 additional home owners—roughly a boost of about 4 percent to the projected level of sales in 2013. In fact, existing home sales have made significant gains in 2013 over 2012, the most recent frame of reference for most of this government data, so it is possible that 2013 data will show considerable improvement over 2012 measures [2].
• Note that there is a striking difference between predominant ownership rates and living at home rates among the 18 to 24 age group and the 25 to 34 age group. This is because many coming-of-age milestones happen in this time period. Age at first marriage is typically 25 to 29 in recent years [3], and the age of the first home purchase is 30 to 32 [4].

• In addition to the fact that more individuals of this age are living with parents and that homeownership rates are currently lower than the longer term average for 25 to 34 year olds, one further reason for the lower household to population ratio is that the 18 to 34 age group is younger than at any time since the early 1980s. The average share of 18 to 24 year olds among the 18 to 34 year old age population cohort is 39.9 since 1983. In 2011 and 2012, 18 to 24 year olds were 42.2 percent of the total age group. This means that the average for the entire 18 to 34 year old group will be more representative of 18 to 24 year olds than is typical. A similar trend is seen among households.

• In fact, adjusting for the higher share of 18 to 24 year olds in the group, the story is the same, but more or less dramatically so depending on the statistics. The share of adults aged 25 to 34 living at home holding constant the shares of each age sub-group is at a record-high 30.6 percent—even higher than the unadjusted figure—while the homeownership rate is somewhat better due to the higher homeownership rate among 18 to 24 year olds now compared to other times in history.
• For more information on home buyers and home buying and selling trends among generations, both young and old, visit http://www.realtor.org/reports/home-buyer-and-seller-generational-trends

[1] Note: In CPS data, unmarried college students living in dormitories are counted as living in their parent(s) home.
[2] All data is subject to sampling and non-sampling error. These point estimates have been presented without corresponding margins of error that would account for sampling error and may not be comparable to other survey measures due to nonsampling error. A technical discussion of these errors in the CPS and CPS/HVS is available here: http://www.census.gov/prod/techdoc/cps/cpsmar13.pdf and here: http://www.census.gov/housing/hvs/files/qtr213/source_13q2.pdf
[3] http://www.census.gov/newsroom/cspan/family/20130906_cspan_family_4.pdf
[4] Data from the Profile of Home Buyers and Sellers, National Association of Realtors®