'I'm home!' Adult children move back in

November 4, 2011: 10:21 AM ET
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NEW YORK (CNNMoney) -- With job openings scarce, getting adult children to leave the nest is becoming a lot more difficult.

The number of adult children who live with their parents, especially young males, has soared since the economy started heading south. Among males age 25 to 34, 19% live with their parents today, a 5 percentage point increase from 2005, according to Census data released Thursday. Meanwhile, 10% of women in that age group live at home, up from 8% six years ago.

Among the college-aged set, the 18- to 24-year-olds, 59% of males and 50% of females lived with their parents, up from 53% and 46%, respectively.

The fact that so many young people are unable or unwilling to flee the nest "cuts into the formation of new households quite a lot," said Mark Zandi, chief economist for Moody's Analytics.

Zandi calculated that there are about 150,000 fewer households being formed per year than the 1.2 million that would be in a normal, well-functioning economy.

A decline in household formation means depressed demand for homes and as a result, lower home prices, explained Lawrence Yun, chief economist for the National Association of Realtors.

But even if all of those young adults rented it still would have an impact on home sales.

Home prices heading for triple-dip

"If more young adults were in the market for rentals, rents would rise and higher rents can tip some households [of all ages] into buying homes," said Yun.

As a result, the economy as a whole suffers when young adults fail to venture out on their own.

Taking such a large number of people out of the market -- rental or purchase -- can lower property values sharply, according to Ken. H. Johnson, a real estate professor at Florida International University and co-author of a study on whether it's better to buy or rent.

"The real cost to home prices is the presence of vacant houses," he said. Empty homes make communities less bustling and attractive. Yards get overgrown, paint peels and roofs sag, giving whole blocks a forlorn look. The vacant homes also can invite crime. All that depresses prices.

It may be awhile before young adults start flying the coop. The unemployment rate among 25 to 34 year olds was 9.4% at the end of June, according to the Bureau of Labor Statistics, 0.3 percentage point higher than the national average. For younger adults, the job hunt has been even harder with 14.9% of those ages 20 to 24 out of work and 22.1% of 18- and 19-year-olds idle.

Long-term unemployment can devastate the prospects for young people, said Doug Duncan, the chief economist for Fannie Mae.

"The longer the period of unemployment lasts, the more that will affect their lifetime earnings," he said. "They will have less wealth and that could delay home ownership."

Check out your local home price forecast: 384 markets tracked

It can also affect where their parents choose to live after their kids come of age. Many couples eagerly anticipate closing the door behind their youngest children as they depart. They can then unload that big, family-sized house and move into something smaller and more affordable.

Instead, Junior comes home and those plans fly out the window.

"If there are fewer empty nesters, there will be fewer people downsizing," said Zandi. "If my son comes home from college and moves back in, I know I'm not moving." To top of page

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