Interesting new study:
Debt, Jobs, or Housing: What’s Keeping
Millennials at Home?
Zachary Bleemer, Meta Brown, Donghoon Lee, and Wilbert
van der Klaauw
Federal Reserve Bank of New York Staff Reports, no. 700
Abstract
Young Americans’ residence choices have changed markedly over the past fifteen years, with recent cohorts entering the housing market at lower rates and lingering much longer in parents’ households. In this paper, we use rich panel data to document steep increases in the rate of living with parents or other substantially older household members, with youth increasingly forsaking living alone or with groups of roommates. Homeownership at age thirty, correspondingly, shows a steady deterioration following the recession. In order to understand the consequences of this declining independence for young people’s economic lives, and hence for the ongoing U.S. economic recovery, we must understand its origins. We exploit cross-cohort and geographic variation in housing market, labor market, and student debt changes to estimate the relationship between local economic conditions and young Americans’ residence choices. We model flows into and out of co-residence with parents at the individual, county, and state level. Estimates suggest countervailing influences of local economic growth on co-residence: strengthening economic climates support moves away from home, but rising local house prices send independent youth back to parents. Finally, we find that student loans deter independence. All else equal, state-cohort groups who were more heavily reliant on student debt while in school are significantly and substantially more likely to move home to parents when living independently, and are significantly and substantially less likely to move away from parents when living at home.
Young Americans’ residence choices have changed markedly over the past fifteen years, with recent cohorts entering the housing market at lower rates and lingering much longer in parents’ households. In this paper, we use rich panel data to document steep increases in the rate of living with parents or other substantially older household members, with youth increasingly forsaking living alone or with groups of roommates. Homeownership at age thirty, correspondingly, shows a steady deterioration following the recession. In order to understand the consequences of this declining independence for young people’s economic lives, and hence for the ongoing U.S. economic recovery, we must understand its origins. We exploit cross-cohort and geographic variation in housing market, labor market, and student debt changes to estimate the relationship between local economic conditions and young Americans’ residence choices. We model flows into and out of co-residence with parents at the individual, county, and state level. Estimates suggest countervailing influences of local economic growth on co-residence: strengthening economic climates support moves away from home, but rising local house prices send independent youth back to parents. Finally, we find that student loans deter independence. All else equal, state-cohort groups who were more heavily reliant on student debt while in school are significantly and substantially more likely to move home to parents when living independently, and are significantly and substantially less likely to move away from parents when living at home.