Starting to Launch: Millennials Are Leaving Mom and Dad's Basement

Recent news stories have lamented the seeming inability of Millennials to launch from their parents’ homes and establish their own households. For example, an analysis published in the Wall Street Journal late last year indicated that the proportion of adults aged 18 to 34 who were living with their parents or other relatives was at a 75-year high.¹

These recent analyses of young-adult living arrangements typically use a traditional approach that compares the same age group containing different people at different points in time. However, in a new edition of Housing Insights, Fannie Mae’s Economic & Strategic Research (ESR) Group presents an alternative perspective using “cohort analysis.” Here, ESR monitors the change in the proportion of young adults residing with parents for the same group of young people as they grow older and pass from one age group to the next.

Cohort analysis reveals that the pace at which young adults are departing their parents’ homes has accelerated substantially (see chart below). Because the probability of living at home declines as young people grow older, all values in the chart are negative. The more negative the value, the more rapidly a cohort departed the parental home as it aged.

For young adults aging through their mid- to late twenties or early thirties, the reduction in the share living with parents was significantly greater between 2013 and 2015, a period of economic recovery, than it was between 2010 and 2012, when the economy and housing market were still reeling in the aftermath of the Great Recession. For example, among those young adults who aged from 24-25 in 2013 to 26-27 in 2015 (red arrow on the chart), the proportion residing with parents fell by 7.6 percentage points, whereas the cohort that passed through the same age range between 2010 and 2012 experienced a decline of only 5.4 percentage points.

Related: Millennials Have Begun to Play Homeownership Catch-Up

Millennials’ accelerated rate of departure from their parents’ homes bodes well for housing demand and is likely to affect several segments of the housing market. Because the first step in independent living for many young adults is a rental unit, accelerated move-outs should support demand in both the multifamily and single-family rental markets. In addition, ESR’s other recent research using cohort analysis shows that Millennials in their late twenties and early thirties have accelerated the pace at which they are becoming homeowners. Therefore, some of the Millennials who are moving out of their parents’ homes into rentals today will end up in the starter home market in coming years. Regardless of the housing market segment affected, Millennials at long last appear to be launching more rapidly from their parents’ homes and releasing some of their pent-up housing demand.

Patrick Simmons
Director, Strategic Planning
Economic & Strategic Research Group
Fannie Mae

April 27, 2017

The author thanks Doug Duncan, Orawin Velz, and Mark Palim for valuable comments on the Housing Insights upon which this Perspectives is based. Of course, all errors and omissions remain the responsibility of the author.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

¹ Trulia research cited in Chris Kirkham, “Percentage of Young Americans Living With Parents Rises to 75-Year High,” The Wall Street Journal, December 21, 2016.