Fewer young adults forming households

The rate of household formation declined considerably following the recession, and some age groups were more affected than others.

The rate of household formation declined considerably following the recession, and some age groups were more affected than others.

Tighter lending standards, stagnant wages and crushing student debt is expected to have a lasting impact on young adults for quite some time, according to a commentary from Federal Reserve Bank of Cleveland vice president Timothy Dunne.

"This may have increased the incentive of individuals to delay household formation in order to save for a down payment, build credit histories, or repair tarnished credit scores," Dunne said.

Property data indicates consumers between the ages of 18 to 34 experienced the biggest drop off, and nearly 2 million young adults who fall into this age bracket now live in households headed by their parents.

In 2010, the homeownership rate among young adults declined to just 35.5 percent. While this had a negative impact on the housing market, it bolstered rental rates across the country.  

The overall household formation rate experienced a modest uptick so far in 2012, but it has yet to offset the shortfall.



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