After riding out the tough economy in their parents’ basements, more young American adults are starting to break out on their own, pushing up the nation’s mobility rate and giving an important boost to the housing market and the broader recovery.
Thanks to improving job prospects and low mortgage rates, adults in their 20s and early 30s are moving into their own apartments and buying homes in increasingly greater numbers, according to real estate experts and government statistics.
Census Bureau data show that the nation added more than 2 million households in the 12 months that ended March 31, about triple the annual average for the previous four years. Most of the gain came from middle-age and older baby boomers, but young adults are hitting the road as well.
The recession had knocked the overall U.S. interstate migration to a post-War World II low, but last year the number of people ages 25 to 29 who moved across state lines reached its highest level in 13 years, said William Frey, a demographer at the Brookings Institution.
Frey called the shift significant: “They’re leading indicators of migration coming for the broader population.”
A week ago, Kevin Ratz, 27, hitched a U-haul to his Ford pickup, loaded the trailer with furniture, stereo equipment and skis, and drove to Chicago.
Ratz left behind his parents’ suburban Detroit home, where he stayed in his childhood room for the past two years. The room was pretty much unchanged with its sports-car posters on the wall and youth-hockey trophies lining the bookshelf.
One big reason he moved back in with his parents was the weak job market for young pilots. Although he had a degree in aviation from Western Michigan University and some experience as a flight instructor, he found few well-paying openings in the field.
So for the past two years, Ratz waited it out by working as a tour guide, saving what money he could and enjoying his mom’s home cooking.
Recently he landed a job at a flight school in Chicago and took an apartment in the hip neighborhood of Wicker Park just north of downtown.
“It feels good to get out and be on my own again,” Ratz said.
People tend to move long distances for new jobs. During the recession and slow recovery, young people better educated than their parents’ generation have struggled to compete with older workers in a job market with several unemployed people for every opening. That compares with about two people unemployed for every job opening before the 2007-2009 recession.
Without sufficient incomes, they delayed marriages and having children, and simply stayed where they could pay little or no rent. The result was that 2 million more adults ages 18 to 34 were living under their parents’ roof last year than there were four years earlier, according to an analysis of census data by Timothy Dunne, an economist at the Federal Reserve Bank of Cleveland.
In the past year, the jobless rate of those ages 25 to 34 has dropped a little more sharply than it has for the overall population. It fell to 8.3 percent in October from 9 percent at the start of the year for those workers, compared with a decline to 7.9 percent from 8.3 percent for all workers.
“With stronger economic fundamentals, the process will pick up speed,” Dunne said. “I think there’s pressure. Households can delay formation for only so long.”
As more young adults go out on their own, one big question for the economy is: Will they rent or buy?
Many are deciding to rent because they can’t afford to buy or are wary about the housing market. But there’s a dwindling supply of available apartments in large cities, where young adults tend to settle. Builders have been slow to put up new units, pushing down vacancy rates and driving up rents.
Meanwhile, mortgage rates have fallen to historical lows. That’s made owning a home more affordable than it has been in years — even competitive with rents. Perceptions that the housing market is starting to heat up also have more people thinking of buying.
As for all the talk about the “fiscal cliff” — automatic government spending cuts and tax increases that will kick in Jan. 1 unless Congress acts — it hasn’t fazed consumers, at least not yet, brokers said.
Not when 30-year mortgages can be had for 3.25 percent interest, said Vladimir Kats, a Baltimore broker with Keller Williams Realty who specializes in distressed properties and focuses more on young buyers.
“The interest rate is the main driver,” Kats said.