Young adults in the U.S. bear the brunt of soaring home prices

These days،housing affordabilityis a struggle for nearly everyone.

But for young adults just starting out، soaringhome pricesandsky-high rentshave become one of the greatest obstacles to making it on their own.

Nearly one-third، or 31%، of Generation Z adults live at home with parents because they can’t afford to buy or rent their own space، according to a recent report byIntuit Credit Karmathat polled 1،249 people age 18 and older.Gen Z is generallydefinedas those born between1996 and 2012، including a cohort of teens and tweens.

“The current housing market has many Americans making adjustments to their living situations، including relocating to less-expensive cities and even moving back in with their families،” said Courtney Alev، Intuit Credit Karma’s consumer financial advocate.

Multigenerational household

Overall، the number of households with two or more adult generations has been on the rise for years، according to aPew Research Center report. Now، 25% of young adults live in a multigenerational household،up from just 9% five decades ago.

Finances are the No. 1 reason families are doubling up، Pew also found، due in part to ballooningstudent debtandhousing costs.

It’s the least affordable housing market in years

Betweenhome pricesand mortgage rates،2023 was the least affordable homebuying year in at least 11 years، according to a separatereportfrom real estate company Redfin.

Now، the average rate for a 30-year، fixed-rate mortgage is hovering near 6.6%، down from recent highs but stilltwice what it was three years ago.

“Given the expectation of rate cuts this year from the Federal Reserve، as well as receding inflationary pressures، we expect mortgage rates will continue to drift downward as the year unfolds،” said Sam Khater، Freddie Mac’s chief economist.

Lower mortgage rates

“While lower mortgage rates are welcome news، potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”

Of course، housing isn’t the only issue.Millennials and Gen Z facefinancial challengestheir parents did not as young adults. On top of carrying largerstudent loan balances، theirwages are lowerthan their parents’ earnings when they were in their 20s and 30s.

“At the end of all that، you are not left with a whole lot of money to spend on a down payment،” saidLaurence Kotlikoff، economics professor at Boston University and president ofMaxiFi، which offers financial planning software.

For parents، supporting grown children can be a drain

Even if they don’t live at home، more than half of Gen Z adults andmillennialsare financially dependent on their parents، according to a separatesurvey by Experian.

For parents، however، supporting grown children can be a substantial drain at a time when their own financial security is in jeopardy.

Sharing a home

Not surprisingly، parents are more likely to pay for most of the expenses when two or more generations share a home. The typical 25- to 34-year-old in a multigenerational household contributes 22% of the total household income، Pew found.

From buying groceries to paying for cellphone plans or covering health and auto insurance، parents are spending more than $1،400 a month، on average، helping their adult children makeendsmeet، anotherreport by Savings.comfound.

“It has to go both ways،” Kotlikoff said.

Overall، there can be an economic benefit to these living arrangements، Pew found، and Americans living in multigenerational households are less likely to be financially vulnerable. “If you are in financial union، make the best of it،” Kotlikoff said.