New data suggest the economy has recovered to the point that more young adults are moving out.
During last year’s Republican National Convention, vice presidential candidate Paul Ryan summed up some stresses and frustrations of young Americans trying to leave the family nest — but unable to find jobs in the economic downturn.
“College graduates should not have to live out their 20s in their childhood bedrooms, staring up at fading Obama posters and wondering when they can move out and get going with life,” he said.
But new data suggest the economy is recovering enough that young people who returned home — or never left, because of tight finances — are now setting up their own households with roommates, other family members or significant others.
Reuters reports that creeping economic growth and a thawing labor market have led to a two-year uptick in the number of individuals and families moving into their own homes.
“The rise in household formation bodes well for the housing recovery,” Guy Berger, an economist with RBS, told Reuters. “Instead of having too many houses, we are turning to a situation where there aren’t enough.”
And while U.S. home ownership rates remain at recession levels, rising demand from a stronger rental market is apparently prompting a rise in construction of apartment buildings.
“We are going to see more recovery in the rental market, in the very short run,” Gary Painter, a public policy professor at the University of Southern California, said in an interview with Reuters. “As the market improves, people will start to face higher rents and over time, that will spill over into the owner-occupied market.”
And according to Derek Thompson in The Atlantic, stronger figures for multifamily homes, along with rising construction rates and home prices, suggest 2013 “could be the year our economy breaks out of ‘new normal’ growth and gets back to ‘normal normal’ growth.”
“A market that was at an incredibly low point has stabilized and is showing signs of getting better,” said Rick Sharga, with Carrington Mortgage Holdings in Aliso Viejo, Calif., during an interview with Mercury News. “But it’s all relative. We’re not looking at a boom. We’re looking at a slow and steady recovery.”
The National Association of Realtors, meanwhile, projects its Housing Affordability Index for all of 2012 will rise to a record high. The higher the index, the greater the household purchasing power.
But the uncertain economy creates a double-edged sword for would-be home buyers.
“Although 2012 was highest on record, the excessively tight underwriting precluded many would-be homebuyers from locking-in generational low interest rates,” said NAR chief economist Lawrence Yun. “Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power. A window of opportunity remains open for buyers who can qualify for a mortgage.”
“Household formation is miserable now, but it’s projected to pick up for a simple reason,” said the Atlantic’s Thompson. “An improving economy is bound to encourage young people to get out, buy apartments, and get married, eventually.”