Last week, the release of United States Census data revealed that the numbers of young adults leaving home is still decreasing. The data, from the U.S Census Bureau, showed that the number of adult children who are choosing to live with their parents increased by 1.2 million between 2007 and 2010. The total number of adult children who are living with their parents now stands at almost 16 million. The majority of young people responsible for the increase were those between the ages of 25 and 34, which shows that people are actually moving back with parents having once lived separately.
The results of this survey are significant. For several years, since the crash of the housing market in 2008, we have been aware that the situation has not been good for first time buyers looking to make their first steps onto the property ladder. Despite the US base rate dropping to just 0.25% in 2008 (and staying that low ever since) banks were slow to pass these rate reductions to customers. What was worse was the fact that banks have been reluctant to lend to people without squeaky clean credit histories and large deposits - two things that younger adults rarely enjoy.
Taking a step backwards
As a result, many youngsters looking to buy a property for the first time were turning to the 'bank of Mom and Dad'. That's nothing new. However, what is particularly alarming - although not particularly surprising - is that many young adults who have already made that first difficult step onto the property ladder are choosing to take a step back and move in with their parents again.
The rising cost of living is evidently becoming too much for young people who are already struggling to get their adult lives off the ground. What's more, the natural progression for these young adults - the prospect of upgrading their homes through purchasing slightly larger properties - is becoming increasingly unrealistic.
Second time buyers hit
Would-be second time buyers are now finding themselves encountering problems. Many first time buyers have found themselves in negative equity thanks to crashing housing prices, particularly those unlucky enough to have bought a property at the height of the boom period in 2007. Now, the gap between the price of an average first time home and an average second time home is widening. Those lucky enough to have equity in their homes are using this to put towards the cost of an upgraded home. Those without that luxury are turning, once again, to their parents.
Mortgages remain expensive; although interest rates have come down, the overall cost of arranging a mortgage remains high. What's more, finding good remortgage deals – although possible – is difficult because of the massive gaps in prices between a first and second home. Those looking to remortgage should shop around carefully - just because they have a mortgage with a certain provider already, doesn't meant that company is necessarily the best one to take out a second mortgage through. Bear in mind that the US base rate looks likely to remain very low for quite some time, so buyers should make sure they either get a long term deal with a low fixed rate (at least three years) or a variable rate that is stays as close to the base rate as possible, regardless of any movement.
Sharing growing in popularity
The Census also revealed that another way young people were dealing with the increasing cost of running a household was by sharing. At the beginning of 2007, the number of shared households in the USA stood at 19.7 million. At the start of 2010, this figure had risen by 11.4 percent. Unsurprisingly, many of the people that were living as the "extra adults" in these shared households were surviving on very low incomes; 40% of these people were living below the poverty line.
This Census shows the ripple effect of the US housing crash; those that were once immune, having “safely” leapt onto the property ladder before the crash, are now finding themselves victims. It makes one wonder who will be next - third time buyers, fourth time buyers? Or those looking to retire? One thing is for sure, this recession is cutting deep - and there are very few people that will escape unaffected. We just need to make sure we are best equipped to deal with the extra challenges that will be thrown our way when buying a property – and that means shopping around to find the best deals at every stage of moving.