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The improving economy isn't getting millennials out of their parents' basements

"Dear Mom and Dad: You're the best landlords ever. Love, Caitlin."
"Dear Mom and Dad: You're the best landlords ever. Love, Caitlin."

Everyone knows millennials live with their parents in far greater numbers than prior generations did. But this trend hasn't abated even with an improving economy. Much of the trend may have to do with factors that have nothing to do with economic cycles, such as student debt and delayed marriage. The New York Fed released new data this week showing that homeownership rates for young adults keep sliding, while the rate of living with parents is staying high, even as economic fundamentals like unemployment and growth improve.

Chart homeownership

(Federal Reserve Bank of New York)

It's not just the youngest adults having problems, it seems; both they and 30-year-olds are on roughly the same trajectory, living-situation-wise: away from ownership and toward their parents' spare rooms. And Census data released last week shows something similar. While its estimates are different from the New York Fed's (thanks to different samples and different definitions of what it means to live with your parents), the Census likewise finds that the levels of living with parents are climbing — and that 25-to-34-year-olds in particular are increasingly choosing to move back home.

census living with parents

(U.S. Census Bureau)

It's tempting to blame the recent economic meltdown for a lot of young adults' woes. After all, they have higher unemployment rates than older adults and are notoriously underemployed as well. And while the financial crisis (and the unemployment that came with it) certainly didn't help things, there's an important trend here: that moving in with mom and dad predated the crisis. That's because things like later marriage and heavy student debt also predated the crisis.

Slate's Jordan Weissmann saw a bright side to this trend:

"At some point, these twenty- and thirtysomethings are going to start climbing back out of the basement. And when they do, it will be a boost to the economy. Right now, the U.S. household formation rate ... is incredibly low. When it speeds up, you'll see more demand for housing, and the things that come along with it, like appliances, furniture, televisions, and so forth. So, you know, just think of this graph as increasing potential."

He's right — a better economy will probably send some of these youngsters out into the appliance-and-furniture-market, which will in turn improve the economy. But this living-with-parents trend will only abate so much, and it's certainly not going to rebound to pre-recession levels. Indeed, a 2014 Federal Reserve paper found that it's debt (particularly student debt) that's keeping young adults in their parents' basements, not a depressed economy. And while the economy is improving on a number of fronts, student debt is certainly not budging downward. Boomers, you may want to get used to your young roommates for a bit longer.