Decades ago, the American Dream meant owning your own home or having the opportunity to explore the world on your own as a young adult through solo apartment living. A century ago, homeownership plus small business ownership was the norm.

Now, the average age at which more than half of California residents are homeowners is 49…and rising.

Co-residency with parents and other relatives is rapidly becoming commonplace.

High home prices and rents are the main catalyst of this trend, says Desen Lin, assistant professor of finance at Cal State Fullerton’s College of Business and Economics.

Lin co-authored a paper with faculty from the University of Washington and University of Pennsylvania Wharton School entitled “Why do young adults coreside with their parents?” The article appears as the leading article in the 2024 January issue of the journal Real Estate Economics.

The study looks at the trend in which one of every two adults aged 18-29 currently lives with their parents, up from one in four in 1960.

And understanding that trend helps the public better understand the trends impacting their families and helps policymakers and academics look at solutions for the affordable housing crisis.

“The co-residence share among young adults has been increasing since the 1960s, though it has accelerated after 2000, going up from 39% to 49% in just two decades,” observes Lin. “We are currently at an all-time high since 1900. My coauthors and I wanted to know why this evolution in household formation was happening.”

All About Housing Affordability

Lin was surprised to learn that rather than unemployment, it was housing affordability that played the major role in this trend since 2000. But this was not the case before 2000.

“The decline in housing affordability directly impacts household formation through delays in marriage and childbearing. The decline in affordability alone after 2000 contributes to a quarter of the increase in co-residency among young adults,” reports Lin.

With increases in home and rent prices or at least continuing unaffordability likely to persist for the foreseeable future and with the rise of immigrant groups, the trend toward multigenerational living is likely to increase in the years ahead.

“As long as housing remains unaffordable to rent or own, the trend of living with parents or grandparents will continue as a way to share living expenses,” says Lin. “Multigenerational living may also increase in the coming years as historical minority ethnic groups become the majority by mid-century.”

If You’re Young and Living in High-Cost Areas, What Can You Do?

Despite the unaffordable housing prices, most young adults are choosing to stay in the high-priced cities of America, because that is where the job opportunities are and most people enjoy the amenities of urban or suburban living vs. rural America, which is more affordable. Still, Lin gives some advice on how to lower the cost burden and possibly achieve homeownership one day.

“Establish a long-term financial plan, save as much as possible for the down payment, and improve credit scores to lower borrowing costs,” advises Lin. “Government assistance programs that target low-income or first-time homebuyers and feature low down payments and other benefits are good to know about. Even in the high-cost markets, starter homes could be a good choice to start accumulating housing wealth. I also recommend the real estate courses offered by the Department of Finance that help our students make educated decisions on future home purchase or investment.”

For policymakers, Lin recommends efforts to relax density restrictions or streamline zoning approval processes as ways of making homeownership more affordable or at least more available.

For More on Real Estate

From Cal State Fullerton’s Center for Real Estate, which provides mentoring and networking for real estate-focused students and a real estate baccalaureate concentration, to the research of finance faculty on trends in the real estate market, the College of Business and Economics is at the forefront of providing applied research on today’s market.

For more on real estate research and education, read more of our articles.