These days, housing affordability is an issue for almost everyone.
But for young adults just starting out, rising real estate prices and exorbitant rents have become one of the biggest obstacles to self-employment.
According to a recent report from Intuit Credit Karma, which surveyed 1,249 people ages 18 and older, nearly a third, or 31%, of Generation Z adults live at home with their parents because they cannot afford to purchase their own space or to rent. Generation Z is generally defined as those born between 1996 and 2012, including a cohort of teens and tweens.
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“In the current housing market, many Americans are making adjustments to their living situations, including moving to cheaper cities and even moving back in with their families,” said Courtney Alev, consumer finance advocate for Intuit Credit Karma.
Overall, the number of households with two or more adult generations has been rising for years, according to a report from the Pew Research Center. Today, 25% of young adults live in multigenerational households, up from just 9% five decades ago.
According to Pew, finances are the top reason families are doubling, due in part to rising student debt and housing costs.
It is the least affordable housing market in years
According to a separate report from real estate firm Redfin, 2023 was the lowest year for home prices and mortgage rates in at least 11 years.
Meanwhile, the average interest rate for a 30-year fixed-rate mortgage is about 6.6%, which is down from recent highs but still double what it was three years ago.
“With expectations of interest rate cuts from the Federal Reserve this year, as well as easing inflation pressures, we expect mortgage rates to continue to decline throughout the year,” said Sam Khater, chief economist at Freddie Mac.
“While lower mortgage rates are welcome news, potential homebuyers still face the dual challenge of low inventory and high home prices, which continue to rise.”
Of course, accommodation isn't the only problem. Millennials and Generation Z face financial challenges that their parents did not face as young adults. In addition to having higher student loan balances, their wages are lower than what their parents earned when they were in their 20s and 30s.
“At the end of the day, you don't have a lot of money left over to spend on a down payment,” says Laurence Kotlikoff, an economics professor at Boston University and president of MaxiFi, a financial planning software provider.
Supporting adult children can be a burden for parents
Even when they don't live at home, more than half of Gen Z adults and millennials are financially dependent on their parents, according to a separate survey from Experian.
However, supporting adult children can be a significant burden for parents when their own financial security is at risk.
Unsurprisingly, when two or more generations live in the same household, parents are more likely to bear the majority of the costs. The typical 25- to 34-year-old in a multigenerational household contributes 22% of total household income, according to Pew.
Another report from Savings.com found that parents spend an average of more than $1,400 per month to help their adult children make ends meet, from buying groceries to paying for cell phone plans to paying for health care – and car insurance.
“It has to go both ways,” Kotlikoff said.
Pew found that these living arrangements can provide an overall economic benefit, and Americans who live in multigenerational households are less financially vulnerable. “If you’re in a financial union, make the most of it,” Kotlikoff said.
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