Why Parents’ Home is the Millennial Crib

A couple years ago, Daniel Cooper noticed something at the commuter rail station near his home in suburban Boston.   A lot of parents were dropping off their adult children every morning to catch the train into the city.

This fit with something he’d been thinking about as a Federal Reserve senior economist and policy adviser interested in macroeconomic issues like the housing market.  Are millennials living with their parents longer than previous generations?  And, if so, why?

His suspicion was confirmed in recent research with his colleague at the Boston Federal Reserve, María Luengo-Prado. They found that, on average, 16 percent of baby boomers born in the late 1950s and early 1960s lived with their parents when they were between 23 and 33 years old. That jumps to 23 percent of the millennial generation born in the 1980s.  These young adults are also more likely to return home after living independently for a spell.

The economists landed on two primary explanations for the big shift. One is that young adults today earn less relative to rents in their area. Second, higher state unemployment rates impact millennials more. In short, young adults often live with their parents for the simple reason they can’t afford to live on their own.

These two factors together “explain 70 percent of the gap” between millennial and boomer living arrangements, Cooper said. His study controlled for things like whether the young adults lived in urban or rural areas and their parent’s education levels.

But 70 percent wasn’t good enough so the researchers dug deeper to learn what else might have changed since baby boomers’ coming-of-age years.  More burdensome student debt was an obvious reason, but they found very little impact there. The U.S. population’s changing racial composition couldn’t explain what was going on either.

Next they turned to cultural reasons, namely attitudes about whether it’s okay to live with one’s parents. They already knew that young adults today who described their parents as less “authoritative” and more involved were more likely to live with their parents.  To explore this further, Cooper and Luengo-Prado analyzed the General Social Survey (GSS) to tease out a related trend. They found that relevant GSS survey respondents seem, over time, to view living with parents as more acceptable.

Millennials are living with their parents for financial reasons, but it turns out they feel fairly comfortable with the arrangement – more so than boomers who, as young adults, were known for their rebelliousness.

Things have definitely changed.

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.