Buyers purchasing multi-generational homes during the pandemic rose to a series high of 15%,according to the 2020 Profile of Home Buyers and Sellers report. Home buyers who purchased a multi-generational home have been tracked since 2012. The impetus to start tracking the share of multi-generational home buyers was the impact of the Great Recession and the knowledge that many families at the time were doubling up. After retreating for several years, the share has now increased, but for different reasons.
Pre-pandemic there was an even split between buyers who purchased a multi-generational home for aging parents and for adult children boomeranging back or never leaving. Now the top reason to purchase a multi-generational home is for aging parents to move into the home. The data does not indicate where they are coming from, but a mix of assisted living, nursing homes, and living independently is probably the case. This is likely for caregiving for the older relative, but also caregiving for children who are now at home, with closed childcare facilities and limited in-person schooling. There is some data from consumers to support the fact that this living situation is a permanent change. While the concern of COVID-19, loneliness, or childcare needs may have driven the change, the new paradigm may be here to stay. According to the American Health Care Association and the National Center for Assisted Living, 55% of nursing homes are losing money and 72% may not be able to stay open in the coming year.
The second most common reason is cost savings. Family members are pooling incomes to purchase a larger home. This reason has accelerated in the last two years as people are relying on others due to the loss of income or potential loss of income, and marriage rates have continued to drop. This factor has likely seen an increase during the pandemic as many Americans face a cut in wages and lost income.
The third most common reason is adult children boomeranging back home or never leaving. One note to underline however, is that while this is the third most common reason to purchase a multi-generational home, the Census is reporting the highest share of young adults living at home with family since the Great Depression—52% of young adults, aged 18 to 29, are living at home according to a Pew analysis of the Current Population Survey. These families may not to have needed to purchase a new home to accommodate their young adult, but may have already had room. There are a number of reasons why these young adults are at home. More than 80% of college students changed their higher education plans due to the pandemic according to The Census Household Pulse Survey data—perhaps going hybrid, taking a gap year, or going fully online. Younger adults make up many of the job losses Americans are facing, so they may have had to move back home. And lastly, there are many young adults who were tired of living independently and paying rent so they moved back home with parents.
For these young adults at home this can be a massive leg up financially if they are employed. In the pandemic, student debt on federal loans went to 0% interest rate and payments went automatically into forbearance. If a young adult is employed, they could really tackle student debt and pay it down. This would help first-time buyers move out of their parents’ house and into homeownership. Student debt is the one of the biggest hurdles for first-time buyers.
Another potential benefit is coupled with another hurdle for first-time buyers: tight housing inventory. As buyers face multiple bid scenarios, they may need to put contracts on a few homes before they find one that is accepted. The benefit of living at mom and dad’s house offsets this hurdle, as they don’t have to time their end of the lease to the home purchase.
Additionally, many first-time buyers purchase directly from after living in a family member’s home into homeownership—22%. This is a share that would likely increase next year with more than half of young adults at home. This allows first-time buyers to continue saving for a downpayment and closing costs as they find the perfect home.
The number one reason sellers sold during the pandemic is to find a bigger home. There are many reasons for that need for space: zoom home offices, homeschooling, and yard space, but also the need for space for multi-generational buying. A buyer can find a bigger home in the suburbs and a home that is more likely to fit everyone’s needs.
One item of note is that multi-generational buying has always been a higher share among minority families and a factor that has continued to be reported in the latest Snapshot of Race in Home Buying in America report. Nearly one-quarter of Asian buyers purchased a multi-generational home last year.
Check out the full Profile of Home Buyers and Sellers for more trends like these. Members can access the report for free with Right Tools, Right Now. https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers.