Debt, Jobs, or Housing: What's Keeping Millennials at Home?

Abstract

Young Americans’ residence choices have changed markedly over the past fifteen years, with recent cohorts entering the housing market at lower rates, and lingering much longer in parents’ households. This paper begins with descriptive evidence on the residence choices of 1 percent of young Americans with credit reports, observed quarterly for fifteen years in the Federal Reserve Bank of New York’s Equifax-sourced Consumer Credit Panel (CCP). Steep increases in the rate of living with parents or other substantially older household members have emerged as youth increasingly forsake living alone or with groups of roommates. Coupledom, however, appears stable. Homeownership at age thirty shows a precipitous drop following the recession, particularly for student borrowers. In an effort to decompose the contributions of housing market, labor market, and student debt changes to the observed changes in young Americans’ living arrangements, we model flows into and out of co-residence with parents. Estimates suggest countervailing influences of local economic growth on co-residence: strengthening youth labor markets support moves away from home, but rising local house prices send independent youth back to parents. Finally, we find that student loans deter independence: state-cohort groups who were more heavily reliant on student debt while in school are significantly and substantially more likely to move home to parents when living independently, and are significantly and substantially less likely to move away from parents when living at home.

Keywords: student loans, household information

JEL Classification: D14, E24, R21