Young U.S. adults lead growing migration

Group in 20s, 30s out on own again

2/4/2013

After riding out the tough economy in their parents’ basements, more young U.S. 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 super-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-aged 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.

Mr. Frey called the shift significant. “They’re leading indicators of migration coming for the broader population.”

Last month, Kevin Ratz, 27, hitched a U-haul to his Ford pickup, loaded the trailer with furniture, stereo equipment, and skis, and drove to Chicago.

Mr. Ratz left behind his parents’ suburban Detroit home, where he stayed in his childhood room for two years. The room was pretty much unchanged with its sports-car posters on the wall and youth-hockey trophies lining the bookshelf.

One 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 Mr. Ratz worked as a tour guide, saving money 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,” he 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 in 2011 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,” Mr. Dunne said. “I think there’s pressure. Households can delay formation for only so long.”

Laurie Brown, 26, said she was “completely broke” when she moved back into her parents’ house near Tahoe City, Calif., in March, 2011. She returned home with college loans to pay and other debt from bouncing from one place to the next.

“At first, I thought I’d be there only two months,” she said.

But she soon realized just how tough the job market was. She had a bachelor’s degree, magna cum laude, in business communications from George Fox University in Newburg, Ore., but the best she could find after returning home was busing and waiting tables at a restaurant.

“I was really humbled,” she said. “It made me feel like I wasn’t an adult, like you’re back in high school.” Once a week, she got together for happy hour with three high-school buddies who were all in the same boat: college graduates living at home again. “We were kind of a support group,” she said.

Then in April, after finding full-time work at a nonprofit youth development and literacy program in the Tahoe area, Ms. Brown moved into an apartment about 15 minutes from her parents’ home.

“In some ways it was a blessing in disguise,” she said of her 14 months living with her mother and father. As hard as it was at times to adjust, she said, “it was really nice to spend time with my parents. I was able to reconnect with them.”

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.

In Chicago, young adults have been coming out of the woodwork in such large numbers since spring that Maurice Ortiz, marketing director at Apartment People, said his rental agency has added 30 more agents this year.

It wasn’t so long ago, he said, that landlords were begging for tenants, giving free first month’s rent, waiving security deposits and fees, and even offering gift cards for shopping.

“All of these have disappeared; there’s nothing,” Mr. Ortiz said.

Ms. Brown, the Tahoe City resident, had to put down first and last months’ rent, plus a security deposit, before she could move in.

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, especially when 30-year mortgages can be had for 3.5 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,” Mr. Kats said.

One of his former clients is Andrey Mayer. Now 26, he had returned to his parents’ home in a Baltimore suburb right after he graduated from the University of Maryland at Baltimore in mid-2009.

Mr. Mayer reckoned it would take the pressure off financially. With a degree in computer engineering, he found work as a software engineer for the federal government by the end of 2009. He began socking away money.

Then, in the spring of this year, he bought a remodeled, century-old, two-bedroom town house in Federal Hill, just outside downtown Baltimore, for about $260,000. He put 10 percent down and got a 30-year mortgage at 3.75 percent.

He said nothing really drove him to move out.

“I had a bunch of money in the bank getting 0.5 percent interest,” he said. “I figured the housing market was pretty crappy. I’m betting on the economy recovering and seeing a return on investment.”