It was less than two months ago that we brought you “The Mystery Of The ‘Missing Inflation’ Solved, And Why The US Housing Crisis Is About To Get Much Worse.” In it, we documented the inexorable rise of rents in America which, thanks to the housing crisis, has gone from being a society of homeowners to a society of renters, wiping out two decades of “progress” on the homeownership rate in the short span of seven years.
Of course to a certain extent (scratch that, to a “great” extent), the market sowed the seeds of its own destruction by creating ever more “creative” was to allow everyone, even those who couldn’t document their income, to realize the American dream.
Now, the surge in demand for rentals coupled with the fact that because the cost of capital on Wall Street is zero allowing PE to compete with everyday homebuyers has left millennials effectively stuck between rents the can’t afford and homes they don’t qualify for. Throw in a post-crisis economy that churns out waiters and bartenders thanks in part to the fact the very same $1.2 trillion in student loans that are weighing heavily on recent graduates’ finances and you have the perfect setup for a return to mom and dad’s basement.
On Wednesday, Bloomberg is out noting that at an astounding 36.4 percent, the number of women age 18 to 34 living with their parents is now the highest since record keeping began more than seven decades ago:
Some 36.4 percent of women age 18 to 34 lived with their parents or relatives in 2014, the highest since records began in 1940, according to a report released Wednesday by Pew Research Center in Washington. While the share of young men was even greater at 42.8 percent, it wasn’t quite as high as it was some 75 years ago.
But the punchline here is that the Pew Center blames this rather alarming statistic on school and weddings:
College enrollment rates for both full- and part-time students have generally increased over the past couple decades, and some students may be trying to offset stiff tuition costs by bunking with their parents.
Eternal happiness can wait. Millennials are much less likely to be married than their parents were at their age, and marriage often serves as an impetus to move out.
We’ll close with Pew’s take on the economy and Harvard’s. Note the vastly divergent “opinions.” We’ll let you decide who’s right:
The increase is puzzling considering the improved state of the economy and an improving job market that has helped more young people earn enough to venture out on their own. Here are some of the longer term forces that could be at play.
Millennials are also expected to continue experiencing rent burdens as they age. Having entered the labor market during and following the Great Recession, those in the millennial generation have received lower wages and experienced higher rates of unemployment and underemployment than their older counterparts at this point in their lives. As a result, millennials have less wealth accumulated, have delayed forming new households, and are less likely to become owners at the age that older generations had previously. In combination, we are likely to see additional household formation by millennials over the next decade and expect a relatively higher share to remain renters during that period.