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Americans Living at Home Longer, Turning Into Italian Men

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This chart from Calculated Risk via Tom Lawler shows an alarming situation for parents and children.

The percentage of 25-34 year olds living with their parents is at more than a 20 year high, while home ownership among this demographic is at around a 10 year low.

Which all points to one thing: Americans are turning into Italian men.

In the indispensable 2002 study Intergenerational Transfers and Household Structure: Why Do Most Italian Youths Live With Their Parents?” authors Marco Manacorda and Enrico Moretti explore why Italian men—more than any in the world—have such difficulty leaving the nest. Their work sheds some light on our current American “situation.”

According to the study, a mind-boggling 85% of Italian men 18-33 live with their parents. High unemployment and lack of income are a factor, but the authors argue that another economic condition might be at play.

One significant reason why these “kids” stay at home so long is not, as one would think, that they just don’t make enough money to live alone. Instead, it’s that the parents just make so much more money that the kids are willing to sacrifice a little independence for a lot more goodies, like nice TVs and couches and such. And parents are willing to pay for all the goodies because having kids at home make them happier.

All in all, the authors argue, this is a fair deal for everybody involved.

Even neater, the authors did some math and discovered that a “1 million lira increase in annual parental income (approximately $500) raises the probability of cohabiting by 3 to 3.5 percentage points.”

What’s more, as retirement ages get extended, more parents will have more money, and more kids, in turn, should be expected to stay at home even longer.  Which, I guess, just means that this trend will spiral out of control until all the wealthy parents are dead, or something.

So, going back to our American “situation.”

Reflecting on the aforementioned graph, Calculated Risk says “there is a clear inverse relationship, and this suggests some pent up demand for housing units when the employment picture improves (although the demand could be for rental units).”

Fair enough.

Or maybe, just maybe, Americans are finally realizing what Italian men have known all along: living with your parents ain’t so bad when you’ve got flat screen TVs, PlayStations, free food, and access to a charming summer residence in Positano.
POSITION:  No positions in stocks mentioned.