The coronavirus effect: Young adults are moving back home

Nearly 3 million American adults moved in with a parent or grandparent in March and April, amid an unprecedented environment of coronavirus contagion concerns and record-breaking unemployment.

According to a new study released by Zillow, more than 30 million adults were living with their parents or grandparents in April, the highest number ever on record. 

Not surprisingly, Gen Zers, who were born between 1995 and 2015, represented the vast majority — 80% — of those who recently moved back in with the folks.

Typically, 53% to 55% of Gen Zers live at home in April, compared to 55% to 57% in July. But this April, that share surged as high as 61%, an unprecedented level.

That’s not good news for landlords who’ve had to absorb the loss of this renter population. According to the report, Gen Zers pay an estimated $726 million in rent each month, representing 1.4% of the total rental market.

While employment and living situations among this demographic tend to be seasonal and fluctuate even during normal times, the sheer number of those boomeranging back home casts a grim shadow on the future employment potential for Gen Zers, not to mention the rental market they’re leaving behind.

“It is highly unlikely that all leases will be broken, and this full amount would go unpaid, but it serves as a gauge of the potential impact on housing,” the report said.

While students returning home after the nationwide closure of college campuses this spring was behind some of the mass migration, so was unemployment. The number of employed adults ages 18-25 fell by more than 25% — or 5.9 million — in March and April and more than 2 million count themselves as no longer in the labor force.

Adulthood, interrupted

But even before the coronavirus lockdowns and subsequent massive unemployment hit the country — recessions, wage gaps, skyrocketing college costs and student debt led an unprecedented number of emerging adults to take a page from Pete Davidson’s book and move into their parents’ basements.

According to the study, before the pandemic, almost half (46.5%) of employed young adults already lived in a parent’s home. By this April, the share had risen to 49%. And that’s not even considering those who stopped looking for work or students who were not in the labor force already, adding another million-plus to the mix.

While it’s unclear how many of those migrating back to their family homes did so temporarily — either because they wanted to escape health concerns that come with urban living during a pandemic or perhaps to enjoy some of the pandemic luxuries of the family home — there is no doubt that this phenomenon will hurt the U.S. rental market.

Nearly 80% of 18 to 25 year olds who don’t live with a parent are renters who are responsible for approximately $6 billion in gross rent per month. While some of that rent is likely to be paid and some of it represents terminated leases, the potential impact is still significant, depending on the area.

Oklahoma City, Austin and Nashville have the most exposure, with 1.9% of their local rental markets at stake, according to the report. Meanwhile, Miami, New York, and Los Angeles are less exposed, because they have larger concentrations of older millennial renters and other older generations.

Boston, home to some 35 colleges and universities, had a significant exposure, with Gen Z rental risk level of 1.5%.

Recessions typically cause young adults to delay entry into the housing market and remain with their parents — or combine households by moving back in with them — but the situation usually changes once jobs return.

While the May jobs report shows some promise, deep economic shocks have also historically prompted a shift away from spending and an increase in precautionary saving.

How this plays out remains to be seen, but it could be a while before younger Americans are ready to leave the safety and financial security of the family nest.

Why buyers are valuing Realtors even more than before

As lockdowns end, homebuyers are starting to feel more comfortable venturing out.

That’s according to a national survey conducted by the National Association of Realtors on May 20, which showed that the majority of people – 65% – who attended an open house within the last year would do so now without hesitation.

While nearly three-quarters of respondents reported feeling more comfortable visiting a retail store, their perception of the safety of attending an open house or touring a home for sale has gone up since the NAR’s last survey, conducted on May 6, where 56% of respondents said they had no hesitation about open house safety.

An even larger share of those polled — 82% — said that, given the necessary assurances, they’d feel comfortable doing their home shopping in person again within the next three months.

“The real estate industry — and our country — has endured some very challenging times for several months, but we’re seeing signs of progress and we are earnestly hoping the worst is behind us,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, said in a press release accompanying the findings.

Although the majority of respondents are ready to house hunt in person again, they’re also okay with doing it all online — right down to the closing table. NAR found 53% of respondents said they could envision buying a home without ever actually stepping foot inside.

While 73% of active sellers and another 71% of active buyers said they’re comfortable using technology to conduct real estate business, more than half of both buyers and sellers said it was important to have a real estate agent to help them navigate the virtual homebuying and selling process, including weeding through online listings, providing in-depth information not readily available and walking them through an online closing.

But perhaps the most notable takeaway from the survey is how the pandemic has changed customer attitudes about the value of real estate agents. According to the survey, 62% of sellers and 54% of buyers said that having real estate agent’s guidance is especially valuable during the pandemic.

While buyers and sellers are leaning more heavily on agents for their digital savvy, they also put a premium on traditional communication. More than 70% of buyers and 60% of sellers said talking over the phone with their agent made them feel more comfortable and connected.

“While we celebrate homeownership month, we embrace today’s version of homeownership and the unique paths homeowners take to realize their dream,” Malta added. “For prospective buyers, the desire to own a home remains strong and the guidance, expertise and professionalism Realtors provide is more important now than ever.”

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