Eye On Housing
NAHB’s analysis of the Census data shows that only 40% of young adults ages 25 to 34 led their own household in 2016. In comparison, close to 46% of adults in this age group were household heads in 1990 and 2000. Rather, increasing numbers of young adults now choose to live with their parents, parents-in-law, relatives or share housing with unrelated mates. California and New Jersey – states with the least affordable housing markets – register some of the lowest household formation rates in the nation, with only one out of three 25-34 year olds heading their own household.
The growing tendency of 25-34 year olds to stay with parents, relatives or share housing with unrelated housemates means that the number of young adults starting their own households has been declining. As chart below shows, the headship rates (the share of people who are household heads) for young adults ages 24-35 remained relatively stable from 1990 to 2000, with close to 46% of young adults leading their own households. Even by 2006, the headship rate for this age group stayed in the same range with just a small drop that could be attributed to a switch in the data sources from the decennial census to ACS.
Source: NAHB tabulation of data from the 1990, 2000 Decennial Census PUMS, 2006-2016 ACS PUMS
The clear and consistent downward trend in headship rates became apparent during the housing bust and continued ever since. By 2016, the headship rates for young adults dropped to 40%. This translates into 2.4 million households lead by 25-34 year-olds that are currently missing from the housing market but could have been active players if the headship rates remained at the 2000 level.
Over the same years, the share of married partners co-leading independent households dropped from over 29% to under 18%. The rising numbers and shares of unmarried partners (from 3% in 1990 to 6% in 2016) were not enough to compensate for the steeper decline in married partnerships.
It has been suggested that the young adults merely postpone the decision to lead their own households, and what was the typical household-forming behavior in your late 20s a decade or two ago now happens in your late 30s. Unfortunately, as of 2016, there is little evidence to support this hypothesis, as the household formation rates for the 35-44 year old group continued to decline as well.
In fact, the decrease in headship rates is a universal phenomenon with all age groups registering declines since 2000 (see figure below). However, the deterioration in headship rates is most pronounced for the 25-34 age group and they remain accountable for the largest number of households that never formed.
California and New Jersey – states with the least affordable housing markets – register some of the lowest household formation rates in the nation, with only one out of three 25-34 year olds heading their own household. Florida and New York are close behind with the headship rates of 36%. Only Hawaii with its very expensive housing market has lower headship rates, 29%.
At the opposite end of the spectrum are states in the West North Central division. North Dakota, known for the oil booming economy and Iowa recognized for its affordable housing markets, are the only two states where more than half of 25-34 year olds lead their own household. Neighboring South Dakota, Nebraska and Kansas register similarly high headship rates in the 48-49% range.
As might be expected, states with low headship rates among young adults tend to have relatively more 25-34 year olds living with parents. In Hawaii, 30% of young adults live with parents or in-laws. In New York, the share is only slightly lower, 29%. California, Florida and New York are next on the list with 26-27% of young adults living in parental homes. Consequently, the geographic distribution of 25-34 year olds living with parents largely mimics the headship rate distribution, with light colored states registering some of the highest shares of young adults living with parents.
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