Younger Americans often hear lectures from their older counterparts on what it means to be an adult, and the importance of eventually owning a home. A stereotypical baby boomer may admonish millennials and Gen Z for not yet owning a home, believing that these young adults are simply content to remain unemployed and dwell in their parents’ basement.
But the situation is far more complicated and challenging, according to Bright MLS Chief Economist Lisa Sturtevant. Homeownership appears to be out of reach for many young adults as housing costs outweigh income growth, leaving many with few options.
“There’s a lot of conversation around how housing has become unaffordable. I don’t think we talk enough about the income side of things,” Sturtevant says in an interview with RISMedia. “I originally did this research because I was wondering, are there a bunch of first-time buyers who are living at home strategically to save money so that they can come out and buy a home in the next year or two?”
A recent Bright MLS report authored by Sturtevant states that multigenerational living is making a comeback as millions of young adults continue to live with their parents—with some opting to live with their parents, while some have no other choice.
Homeownership is objectively a costly endeavor. The recent NAHB/Wells Fargo Cost of Housing Index (CHI) reported families who earned the nation’s median income ($106,000) were still cost-burdened, as they had to pay more than 30% of their income to cover mortgage payments.
These young “shadow buyers,” as Sturtevant refers to them, are employed adults—aged 25 to 39—who are still living with their parents. Many of them face tremendous barriers to becoming homebuyers, even with jobs, as wages (especially for young people) just haven’t kept up with home prices in many regions.
Using data from 2024, the report found that the top five metros with the highest share of shadow buyers were all located in the coastal states of California, New York and Florida. Simultaneously, the top five metros with the lowest share were located inland throughout the Midwest and South.
Journey to the West…Coast
Because of its densely populated cities, California appears three times in the top five metros with the highest shares of households with shadow buyers. According to the report, Riverside has the highest share of households with shadow buyers at 8.3%. About an hour away, however, Los Angeles comes in second at 7.8%. San Jose ranks in fifth place with shadow buyer households making up 5.5%.
New York City is in third place with a share of 6.5%, and Miami sits in fourth with 5.8%.
For these densely populated cities, Sturtevant opposes the idea that shadow buyers are “mooching” off their parents and attributes the high volume of multigenerational living to expensive housing and cultural factors.
“I think there’s two things going on. I think the first thing is these are the places with the highest first- and second-generation immigrant population. There is a demographic component to this; these are places where folks generally live in multigenerational households. But they’re also the places where housing is the most expensive, like Los Angeles, New York, Miami and San Jose,” she continues.
“Those are on the list of anybody’s least affordable metro areas. And so I think the reason we’re seeing a higher share of shadow buyers in these markets is because first, they’re more likely to have multigenerational living generally. And second, these are the markets that are just the hardest for a first-time buyer to buy into.”
The study outlines the gap between income needed and income earned. Homebuyers need an income of around $319,000 to purchase a median-priced home in Los Angeles, but the median wage for shadow buyers in the area is only $36,100.
Keeping it “All in the Family” in the Mid-Atlantic
At the same time, though, “working adults living with their parents are disproportionately concentrated in the suburbs rather than the urban core,” Bright’s report states.
Given the child-rearing nature of the suburbs, it’s easy to see why shadow buyers are prevalent in metros surrounding Philadelphia, Baltimore and Washington, D.C. After graduating high school or college, children are going back home as they look for jobs and start saving money.
The job search may contribute to keeping young adults at home as well, as the latest data from the Bureau of Labor Statistics (BLS) reported a decrease of 23,000 payrolls in July, which also came with several downward revisions for the previous months.
Breaking it down on a local level, Sturtevant’s study reveals that Prince George’s County, Maryland, had an 8% share of shadow buyer households. Prince William County, Virginia, and Charles County, Maryland, followed in second (7.1%) and third (6.8%), respectively.
Although not explicitly studied in the report, Sturtevant says she wants to examine the relationship between education and young adults living at home. Drawing from her own experiences with her 22-year-old son who recently graduated college, Sturtevant believes that there are misunderstandings about adult children living with their parents.
“I do think there are some misconceptions that young adults are the slacker college graduates playing video games and mooching off their parents. What we found is that more than 70% of young adults living at home are employed,” she says.
What can be done
In light of her research, Sturtevant is worried for future homeowners. Densely populated cities with high costs of living wouldn’t benefit from rate cuts, she says.
“Taking Los Angeles as one of the most extreme examples, you need nine people to pool their money to buy a home. Cutting mortgage rates by a half percentage point isn’t going to make a dent in affordability in any meaningful way.”
Rather than one affordability factor, Sturtevant concludes that several changes need to be made to encourage first-time homebuyers and close the affordability gap.
“We need three things. We need mortgage rates to come down a little bit. Six percent is probably kind of the new normal headed into the next few years. We need home prices to stop growing. We don’t need home prices to fall, but we need home prices to stop growing as fast as income. And we need income growth to start outpacing the cost of housing again. Putting those three things together is what I think it’s going to take to bring more of these first-time buyers into the market,” she says.
While her study contributes to discussions surrounding struggles for first-time homebuyers, Sturtevant states that until changes are made—or an intergenerational transfer of wealth occurs between parents and children—many households will remain a full nest.
“I don’t think that we’re going to see these shadow buyers out in the market anytime soon. The gap is just so big between what they earn and what it takes to become homeowners,” she says.
