The holidays are over and we’re finally getting our home back in order. We had 16 people in the house for Christmas dinner, including our three children and our son-in-law. The youngest was our 21-year-old daughter, so it was a home full of adults.
Our kids stayed with us for several days, which filled the house will conversation, laughter, and joy, as well as trash, noise, laundry, and general craziness. I know the refrigerator, liquor cabinet, and pantry will recover, but it will take time. We’re definitely part of the group that loves to see them show up, and is grateful when they leave. Given that two of our children are Millennials and one is part of Generation Z, we’re even more thankful that they have somewhere to go, because other parents aren’t so fortunate.
According to the Bureau of Labor Statistics, almost 32% of young adults between the ages of 18 and 34 live with their parents. I think I’d rather have them live in the driveway in a motorhome than be in my house, but luckily, we don’t have that problem.
But judging by recent numbers, parents with adult kids at home might be getting some relief, which is good news for all of us.
The percentage of first-time home buyers jumped in recent quarters and reached 39% in the third quarter of 2019, well above the long-run average since 1994 of 35%. But that average includes the dark days in real estate, after the financial crisis, when the share of first-time home buyers dropped to 30% for much of the 2010s. Those tough times dragged down the average of first time home-buyers from its previous mark of 40%, which means the latest figures show a returnrn to normal.
It can’t happen fast enough.
Over the past 12 months, mortgage rates dropped a whopping 1.2%, from near 5% to less than 4%. While that might not sound like a lot, it would drop the payment on a $160,000 mortgage by $120 per month, or $2,440 per year. In the 20% tax bracket, it takes $3,000 in gross income to take home $2,400, so this seemingly small savings can make a difference.
Over the life of the loan the difference is even more impressive, with the lower mortgage rate shaving the interest cost by more than $35,000.
With unemployment bumping along at 50-year lows of 3.5%, average hourly earnrnings increasing more than 3%, and very low mortgage rates, now is the perfect time for Millennials to get out of their parents’ houses and stop blocking their driveways.
On the supply side, it looks like we’re finally getting some love from the builders. In the first three quarters of 2019, new home sales in the entry-level price range of $250,000 to $300,000 rose 31% from 2018, a larger increase than the sales in all other price segments combined. If builders can keep up the pace, then we might just have a decent 2020 in real estate, at least at the lower end.
And to be fully transparent, as a society we need the Millennials to get going. Buying a home is part of the traditional path toward marriage and starting a family, and we need more kids.
According to the Center for Disease Control, Americans had the fewest kids per capita on record last year, which dropped our total fertility rate per woman to 1.73 children. We need at least 2.1 kids per woman to keep the population steady. We haven’t seen that level since 2007. Women have 15% fewer kids today than they did just over a decade ago.
We’re not losing people yet, but if the trend continues, our population will go flat and age as the existing
large generations get older. We’ll look more like Germany and Japan, and not in a good way.
So if you have adult kids, or even grandkids, still milling about the place, consider putting a few strategically-located brochures from home builders on the table. It’s time they got on to the next stage in life, for the good of us all.