Domestic migration rate drops amid decline in young adult mobility

Posted: November 19, 2013 in National Real Estate News

The share of Americans moving to a new home fell this year, underscoring the lingering effects of the Great Recession and a drag on the housing market.

The main factor was an unexpectedly large drop in the mobility of young adults, who account for the largest moves among age groups and the bulk of starter-home purchases.

The Census Bureau reported Monday that the annual domestic migration rate — the share of the nation’s population that moved — declined to 11.7% after rising to 12% last year.

Some experts had thought last year’s gain, up from a post-World War II record low of 11.6% in 2011, marked the beginning of what might be a recovery. But that increase turned out to be short-lived.

“I think it’s troubling,” said William Frey, a demographer at the Brookings Institution who analyzed the Census Bureau’s data.

One of the hallmarks of the American economy has long been the mobility of its people, he and other analysts said. But after four years of recovery, many people are struggling to obtain credit and secure the kinds of jobs and income gains needed to move to a new home or apartment.

Frey said a little more than half of the overall drop in the annual migration rate could be attributed to the downturn in adults ages 25 to 34 making moves within a county.

Such short-distance moves are made generally because people want better or cheaper housing, as opposed to moves across county and state lines, which are driven largely by job changes.

For young adults, their long-distance migration rates drifted down in the last year as well, though they remained above the lows of recent years.

“That corresponds to stagnation in the job market, especially for young people,” said Jed Kolko, chief economist at Trulia, a San Francisco online real estate marketplace. Meanwhile, rising home prices further slowed short-distance moves, he said. “The decline in affordability means fewer people are moving in search of cheaper homes.”

A separate Census Bureau report this month showed that the homeownership rate for Americans under 35 years old was 36.8% in the third quarter, down from 42% in the third quarter of 2007, just before the recession began.

For all ages, the homeownership rate was 65.3% in the third quarter versus 68.2% in the same quarter six years ago.

The slowing mobility, in part the result of young adults less willing or able to start families or move out of their parents’ houses, has significant implications for the housing market and the broader economy.

David Crowe, chief economist at the National Assn. of Home Builders, said the new Census migration finding corresponds to what his builders have been telling him about the low share of first-time home buyers.

“Even if they have a job, they can’t qualify for a mortgage because of extraordinarily tight credit conditions,” he said.

Crowe noted that builders have responded by putting up more higher-end and custom-built houses as opposed to starter homes. As the economy continues to produce jobs at a mediocre pace, Crowe said, “I’m expecting that [the younger adult] cohort will be a part of the future, but at a slow rate.”

One factor that will hold down the nation’s overall migration rate is the aging of the American population. Younger people are much more likely to move than older people.

In addition, Kolko noted that the American mobility rate was sliding well before the recession, from about 20% during the 1950s and ’60s to 14% before and during the housing bubble in the last decade — to its 2011 low.

A major reason for this long-term trend, he said: “The economy has moved from manufacturing to services, to industries that tend to be more ubiquitous.”

Kolko thinks that the migration rate will recover but probably not much beyond the 13.2% figure in 2007.

The latest Census report tells a different migration story for those 55 and over. This group, which tends to move largely for retirement and job-related reasons, did not have as big a recession-related drop-off in migration as younger adults. Their overall migration rate was 4.4%, the same as last year and up from 4% in 2011.

“As the economy picked up and the stock market rebounded,” Frey wrote in a report, “the overall senior migration rose from a low in 2011.” And their long-distance moves, he said, have steadily increased since 2009.

By: Don Lee

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