A record 34.5 percent of Millennials live at home with their parents in California. This rate is higher than the national rate of 30.3 percent which is already incredibly high. There is ample evidence suggesting that Millennials simply do not want the same things as their Taco Tuesday baby boomer parents. And many simply don’t want the McMansion aspiration since many are going to have small families. This is an interesting shift. Boomers are trying to off load larger crap shacks to an audience that is more interested in smaller more centrally accessible properties. In California, those young adults that aren’t living at home are likely living in a rental and paying close to half their income on housing. Good luck saving that 20 percent down payment on a $700,000 crap shack (or $1 million crap shack in the Bay Area). So why do so many young adults live at home if the recession ended in 2009, more than half-a-decade ago?
Young adults living at home
It should come as no surprise that there are a record number of young adults living at home. A Fed study found that one major reason stems from younger Americans having massive debt, largely in the form of student debt. The latest figures show student debt outstanding at $1.3 trillion. This is an increase of $1 trillion in the last decade or so. So many young adults are starting life with a mini mortgage already.
Let us look at the changing trends here:
In 2000, only 24.6 percent of those age 18 to 34 were living at home with a parent in California. That number has increased by nearly 10 percent to 34.5 percent today. Why this is significant is this is the age range when households begin to form. Keep in mind this is household formation meaning buying and renting. Not only is it hard for young people to buy a home in California but many are confronting the rental Apocalypse head-on.
It is expensive to purchase a home when your income isn’t keeping up as well:
Inflation adjusted income for Millennials is down and household costs are up big time. In California, housing prices are driven up by investors, foreign buyers, and a large dose of NIMBYism. So many young Californians are left living at home deep into young adulthood.
Usually the urgent house humping rush to buy comes from adding members to your household. Yet the size of the American family has been shrinking dramatically. All logic is tossed aside when there is this sudden urge to nest. I get countless emails from those with little babies or people that are pregnant that suddenly “need” a bigger home. Screw planning for retirement, we need a crap shack now! But overall, there is less pressure from Millennials because many are waiting to get married:
In 1980, 44.6 percent of those age 18 to 34 were never married. In other words, the majority in this age group was already married. Today, 68.8 percent in this age group have never married. That is a dramatic shift in household dynamics. And once married, how many kids will these couples have? It is interesting that the larger baby boomer homes are serving their purpose as their adult kids come back and live at home.
And this also impacts the retirement situation for these boomers. Many will try to help their kids to purchase a home so there goes a big chunk of money. Many don’t have this money so simply allow their kids to stay at home keeping them from actually selling their property to downsize. What is abundantly clear is that the Millennial age group is having a tough time buying homes in California. California actually leads the nation with young adults living at home.
But you want a starter home you say. Here is a starter home for you:
706 N Madison Ave,
Los Angeles, CA 90029
1 bed with 400 square feet
Let us look at the ad on this starter home:
“Great starter home! This is a fixer upper but full of possibilities for the creative type! Close to LA City College, shopping, fwy access and downtown L.A. Property is being sold in its current “As Is” condition. Great opportunity for investors: property is in RD1.51XL zoning!”
This place will only cost you $409,000 and is full of “possibilities” as the ad says. The current tax assessment is based on a value of $49,680 so gear up to pay 10 times the amount of annual taxes as the current owner.
This is thanks to California NIMBYism like thinking. And you wonder why the young in California are living at home in record numbers.