Young adults leav­ing nest again

Im­prov­ing econ­omy al­lows many to rent or buy their own homes.

Austin American-Statesman - - BUSINESS - By Don Lee Tri­bune Washington Bureau

Af­ter rid­ing out the tough econ­omy in their par­ents’ base­ments, more young Amer­i­can 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.

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

In early De­cem­ber, Kevin Ratz, 27, hitched a U-haul to his Ford pickup and drove to Chicago. Ratz left be­hind his par­ents’ sub­ur­ban Detroit home, where he stayed in his child­hood room for the past two years.

One big 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.

So for the past two years, Ratz waited it out by work­ing as a tour guide, sav­ing what money he could 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,” Ratz 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 re­ces­sion.

With­out suf­fi­cient in­comes, they de­layed mar­riages and chil­dren, and stayed where they could pay lit­tle or no rent. The re­sult was 2 mil­lion more adults ages 18 to 34 were liv­ing un­der their par­ents’ roof last year than 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,” Dunne said. “I think there’s pres­sure. House­holds can de­lay for­ma­tion for only so long.”

As more young adults go out on their own, a ques­tion for the econ­omy is: Will they rent or buy?

Many rent be­cause they can’t af­ford to buy or are wary about the hous­ing mar­ket. But there’s a dwin­dling sup­ply of avail- able 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.

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.

As for all the talk about the “fis­cal cliff” — au­to­matic government spend­ing cuts and tax in­creases that will kick in Jan. 1 un­less Congress acts — it hasn’t fazed con­sumers, at least not yet, bro­kers said.

Not when 30-year mort­gages can be had for 3.25 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,” Kats said.

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