More young American adults leaving the nest

Published: December 11, 2012 

— After living with her parents through college, Katie Dixon was looking forward to graduating, getting a job and moving out her own. “I thought the dominoes would just fall into place.”

But as her graduation from Columbia College approached in May 2011, the dominoes didn’t fall. There were no jobs, especially for a studio art major, she said.

Dixon, now 23, looked for a year, applying at small portrait studios and the photo counters at drug stores and big box retailers. “I never even got an interview.”

Dixon’s story has been playing out across the nation as the country suffered through the Great Recession and its aftermath. But the tide is beginning to turn.

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.”

Although Dixon did not move across state lines, she did finally get the opportunity to move out of her parents’ house after landing a temp job as a receptionist at the University of South Carolina.

“The second I got my job and knew it would be OK, I got out,” she said.

Dixon said she is close with her parents, but the longer she stayed at their house, the lazier she got. When her 18-year-old sister started talking about moving out, it lit a fire under her, she said.

The two actually moved out together and rented a house with two more friends.

And just six months after landing the temp job, Dixon got a permanent spot at USC as a call center administrative specialist.

“I am so proud of how far I’ve come,” she said. “I pay my own bills. I got my own dog.”

Dixon was far from alone in her struggles. “All of my friends are in the same situation.”

And the longer her unemployment dragged on, the more she felt like a failure. “I really felt like, ‘why did I even go (to college)?’”

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 2007-2009 recession.

Without sufficient incomes, they delayed marriages and having children, and simply stayed where they could pay little or no rent. The result was that 2 million more adults ages 18 to 34 were living under their parents’ roof last year than there were 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, one big question for the economy is: Will they rent or buy?

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

(Staff writer Kristy Eppley Rupon and Don Lee of the Tribune Washington Bureau contributed.)

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