Day: 2015/02/08

NY Fed Chimes in on Collapsed Household Formation Rate

Following up on last week’s post, the Federal Reserve Bank of New York put up a post titled, “Household Formation within the ‘Boomerang Generation’,” asking, “Why might young people increasingly reside with their parents?”

Of the excellent charts the authors provide, I’ll only reprint the one I like best:

The write:

The chart also suggests, however, that the trend in parental co-residence has not substantially changed the fraction of individuals living with a single roommate, an arrangement that in many cases is likely to be a romantic partnership. (These patterns are similar for thirty-year-olds, where our analysis using the Current Population Survey indicates that co-residence with one adult is a highly accurate indicator of romantic partnership.)

So when exactly are the <50 percent of 25 year-olds supposed to form romantic partnerships and buy out their parents’ homes?

Answer: Never.

Our results demonstrate that local economic growth is a mixed blessing when it comes to building youth independence: Improvement in youth employment conditions enables young people to move away from their parents, but rising local house prices are estimated to have forced many young people to move back home. These two effects partially offset each other.

[W]hile local economic growth, reflected in rising youth employment and escalating house prices, has mixed consequences for youth independence, the increasing magnitude of student debt among college graduates appears to be driving young people home and keeping them there.

It’s astonishing that the NY Fed of all places is more willing to tell it like it is than the East Coast media elite, who think we need to send everyone to college and that student debt isn’t a problem.