Wayne’s World Redux: What Happens When Living in the Basement Becomes Cool?

That grown-up kid in your basement isn’t necessarily unemployed, or even underemployed. It might just be cool for him to live there.
That’s one theory from Goldman Sachs, where economists this week looked at basement-dwelling millennials across 19 countries.

In the U.S., more than 30 percent of young adults aged 25 to 34 continue to live with mom and dad despite a much-improved job market. It sounds like a lot, but isn’t when compared to other parts of the world. Goldman Sachs economists Hui Shan and Daan Struyven found that only in Finland, France, the United Kingdom and the Netherlands were millennials less inclined to live at home.
Finland had the smallest share, at less than 20 percent. In Italy more than 55 percent millennials live with their parents.

“What explains the cross-country variation? Economic and labor market conditions appear to account for a good portion,” Shan and Struyven wrote. In other words, where jobs are plentiful and incomes are rising, most young adults abandon the nest.

Wayne and Garth, futurists

But that’s only part of the story. In fact, most of the variation between countries can’t be explained away by economic conditions. Part of it must be cultural, the economists wrote.

And if it is cultural, the U.S. could be experiencing a shift in societal norms. Will more young adults live at home not because they have to, but simply because it’s more acceptable? After all, basement dwellers used to be cool. Remember when Wayne and Garth became besties with Aerosmith? (For an explainer on the ancient cultural reference, click here.)

So what?

First-time homebuyers have been few and far between lately, which affects everyone up and down the food chain of homeownership. Across the broader economy, if millennials don’t move out soon, there might be less demand for new houses, which means fewer jobs and slower growth.
Construction still hasn’t recovered from the recession. According to a Census Bureau report today, U.S. builders are on pace to sell 490,000 new homes this year, well below what’s needed to keep up with demand.

Shan and Struyven say regardless of what millennials do, population growth alone will help fuel homebuilding. And if they do emerge from their basements, even better.
Lorraine.Woellert@Redfin.com