Young people might finally start forming households in greater numbers, according to a recent note to clients by Bank of America Merrill Lynch.
This is good news as a house bought through household formation has much more of an impact on the market then when an existing homeowner buys a house only after selling a house.
Since 2008, there’s been a noticeable uptick in 20-somethings living with their parents. It’s not been huge, but it has been significant — about 3-4% from 27% in the mid-2000s.
The BAML report quotes extensively from a report on Millennials by the Council of Economic Advisers released in October of last year. There are a few reasons why the CEA thinks young people lived at home with their parents for longer: first, more young people are going to college than ever before, which can mean living at home for a few more years. Second, the economy has been tough for the last seven years, so some people have moved back in with their parents for economic reasons (though not as many as you might think). Finally, young people just have a better relationship with their parents than previous generations.
However, the kids are growing up.
“We see some evidence that the mentality of the Millennial generation has changed which could help explain the slow recovery in household formation,” the BAML analysts say.
BAML thinks that as the bulk of Gen Y moves into their late 20s and the economy finally starts looking good, the number of people finally going out on their own, forming households, and eventually buying houses, is going to pick up.