Nearly half of all young adults in the US ages 18 to 29 live with their parents, and this living arrangement is boosting the profits of luxury goods companies, according to Morgan Stanley.
The number of people moving back in with at least one parent spiked in 2020 at the height of the covid-19 pandemic to 49.5%, according to census data. It’s since edged down to 48% last year, but the rate is expected by the bank to remain there for 2022, even as people return to a hybrid work set up.
When young adults free up their budgets from daily necessities, they have more income that can be spent on discretionary items like travel, entertainment, and luxury goods.
“We think the structural change in demographics might have been overlooked,” Morgan Stanley’s Edouard Aubin and a team of analysts wrote in a note on Dec. 9. “One of the key demographic trends in the US (and the broader Western market) has been the rising number of young adults living with their parents, driven by financial concerns (i.e. rental costs) as well as other sociological factors (e.g. higher penetration of higher education and increasingly delayed age for marriage).
A Property Management survey in December of 1,200 Americans ages 26 to 41 also found that a quarter lived in a parent’s home. Of those living with their parents, 55% have moved back home within the past year. The top reasons given by respondents were a desire to save money (51%) and inability to afford rent (39%).
Although nearly four-in-ten millennials living at home say their parents charge them rent, nearly half said they were charged less than $500 per month. That leaves lots of room for savings compared to the national median monthly rent, which according to Rent.com in October was $1,980.
Living with parents is common in China
This kind of multigenerational living structure has been the wind in the sails for the Chinese luxury market for decades. Although China has progressively relaxed its one-child policy, the nation is home to an entire generation dubbed “little emperors,” in which six adults—two parents and four grandparents—dote on each child. Culturally, it’s not unusual in China to live with a parent until marriage, and a middle-class family will often pool family savings to buy the only child a property to live in so that the child never has to pay rent.
The rise of second-hand fashion platforms and buy-now-pay-later consumer financing, along with a broadening of luxury goods available, are also dovetailing with the living-with-parents trend, enabling a younger customer base globally for luxury goods.
The luxury sector has proved resilient despite global economic headwinds. A joint Bain & Co. and Altagamma forecast predicts the global luxury goods market will grow 21% this year to 1.4 trillion euros.