It began right after the housing crash, and peaked in the years 2010 to 2011. While dropping slightly in 2012, it rose again last year, and looks on track to stay steady throughout 2014.
I'm referring to the number of "missing households" – young adults who are not yet renting or buying their own homes – 2.4 million of which continue to be an incredible drag on the housing recovery, and, by extension, the economy.
The worst part of this scenario is that the lion's share of these households is believed to be comprised of the Millennial generation, the age group most likely to be first-time home buyers.
Where did they go?
According to Trulia, pre-crisis household formation was 1.1 million annually, which makes these numbers even scarier. From 2008 to 2010, the number of households that went missing went from just under one million to 2.6 million.
Where are they hiding? Many still live with their parents, while others rent apartments with multiple roommates. A combination of heavy college loan debt, a tough job market, and rising home and rent prices are mostly to blame.
A temporary problem, or the new normal?
Some economists think that this problem will take care of itself, in time. In a 2013 Fannie Mae study, Millennials expressed a desire to own their own home, with 90% of renters voicing that opinion. Unfortunately, 42% saw home ownership being a minimum of five years away.
Even that time frame sounds iffy, given the hurdles young people are facing. A Sterne Agee economist pointed out in mid-June that the jobs issue is huge, and that the labor participation rate of college graduates is just 75%, the lowest since government analysts began tracking this metric in 1992. With employment prospects dicey, many young people are unable to pay their student loans, never mind take out a mortgage: more than 10% of college loans are at least 90 days delinquent, compared with a 3.7% delinquency rate on mortgages.
That's not all. Some recent data from the Federal Reserve Bank of St. Louis shows that, of all age groups, families headed by those 40 years of age and younger have suffered the most from the Great Recession. While older households have regained nearly all their wealth lost since 2007, younger families are more than 30% poorer today than they were before the financial crisis.
These numbers do not bode well for housing market participation by young people, in my opinion. The St. Louis Fed numbers bear witness to how much the young have retreated from home ownership since 2005, when that percentage was a little over 50%. In 2013, the rate had fallen to 42.2%, the biggest percentage-point drop of any age group. Sadly, it looks like the first-time home buyer won't be back for a long time – if ever.