The image of a Millennial living in their parents’ basement or childhood bedroom while dishing out tech advice is perhaps a cliché, said the Urban Institute, but the numbers give it some weight.
The number of young adults ages 25 to 34 living with their parents increased from 12% in 2000 to 22% in 2017, according to a new study released by the institute, amounting to an additional 5.6 million Millennials who are shacking up with their parents.
Student debt, the high cost of rent, tight credit conditions and a stagnant labor market all play a role in this trend, the institute wrote.
But presumably, young adults who are saving money by failing to leave the nest will be in a better position to save money for a down payment on their future home, right? Wrong.
According to the study, this life choice has long-term consequences. Those who opted to stay with their parents did not stash away enough cash to put down a larger down payment, and they were less likely to become homeowners 10 years later, than whose who ventured out on their own earlier.
And, for those who did eventually buy their own home, they did not buy more expensive homes or take on lower mortgage debt than those who moved out earlier.
Moreover, those who pursued homeownership later in life were worse off in the long run than their counterparts who jumped to it earlier.
Research shows that those who buy homes earlier in life amass the greatest amount of housing wealth in their later years, with homeowners 25 and younger seeing the greatest return on their investment. This means that delaying homeownership could have a negative impact on your wealth in the long term.
The data prompted the Urban Institute to conclude that moving in with Mom and Dad might not be the best choice for your financial future.
“Living with parents does not better position young adults for homeownership, a critical source of future wealth, and may have negative long-term consequences for independent household formation,” the researchers wrote.