Millennials may not be moving out
Despite less than robust participation by Millennials, formation of new households in Oregon is near a 20-year high. That's good news for all of us.
When young people graduate from trade schools or college and get full-time work, they tend to move out, form a new household and maybe even get married. That's when we see broad economic growth because new households need stuff — bedroom sets, tables, a TV/video game, bath mats, kitchenware . . .
This spending is a key driver of the larger economy, which, in turn, supports housing construction, more jobs and expansion.
With the Great Recession in the rearview mirror, household formation in Oregon has been accelerating for the past three years thanks to in-migration, Oregon's Millennial population wave and long over due wage growth.
According to the Oregon Office of Economic Analysis, wages in lower and middle-income jobs have been flat for 20 years. Only lately are we seeing wage gains, reports Josh Lehman, senior economist at OEA.
"More income means more affordability...more income makes higher rents a little easier to handle," Lehman said.
Despite the growth, household formation in Oregon still has room to go, Lehman said. That's because many millennials who moved in with their parents (or grandparents) during the recession have not moved out. Some 28 percent of young Oregonians ages 18 to 34 are living at home — that's an estimated 246,580 young people. That percentage is unchanged from the worst of the recession when jobs dried up. It remains significantly higher than pre-recession totals when about 20 percent of 18-34 year-olds were at home.
Economists including Lehman had predicted three years ago that as the economic recovery kicked in, young adults would leave home and begin forming new households. There has been growth, but slower than in prior recoveries.
"Most people do not trek out on their own...unless they feel reasonably secure to make rent or pay the mortgage," he said. "The good news is that now more of the kids still living at home have jobs. That's a change from 2013."
Research says the ideal age for completing school and finding a full-time job is 22. Yet nationally, only half to one-third of young adults have done that.
Economic, cultural factors
On the economic side, rising housing costs (rental rates and single-family home prices) have blown a lot of young people out of the water. What first-time job can pay a $1,600-a-month rent for a one-bedroom apartment? Student loan debt also may be a factor. Income that could have been saved for a down payment on a house is being sucked up by loan repayments.
Lehman is quick to mention that some stay-at-home kids are single parents or have a disability that could be a major roadblock to independence. A recent Washington Post story said kids living longer with their parents might be a "good thing." More than 60 million Americans currently live in multigenerational households, the highest portion since the Korean War. It may be a lasting trend, the Post said.
That fits with a cultural shift occurring over the past three generations that has putting off marriage and having babies until their late 20s or early 30s.
Oregon's housing shortage
Housing construction has not kept up with housing demand in Oregon since 2000, Lehman noted. And despite current robust industry growth, demand for new housing still is outstripping supply by 10,000 units a year, statewide.
Now, as population growth in Oregon starts to slow, the OEA is somewhat optimistic that supply-side housing construction will continue. According to the latest drivers' license trends that slowing is already underway as fewer newcomers this year are signing up for in-state drivers' licenses.
"We will still see high rents and a high-priced housing market but demand will slow, especially with the next recession (whenever it arrives) that will bring balance to the market," Lehman said. "At least housing affordability is not getting any worse."
But for some Millennials, high housing costs will keep them from stepping out. Maybe that's okay. This aspect of the sharing economy may be a help to everyone — old and young.
Julia Anderson writes for women about money and retirement at: sixtyandsingle.com