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Returning to the Nest: Debt and Parental Co-residence Among Young Adults

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Abstract

This paper examines the relationship between a young adults' debt burden and the decision to co-reside with a parent. Using a quarterly panel of young adults' credit histories, and controlling for age, county, and quarter fixed effects, and local demographic characteristics, unemployment rates, and house prices, we estimate the relationship between current period debt and subsequent decisions to co-reside with a parent. Our results indicate that indebtedness--as measured by average loan balances, declining credit scores and delinquency on accounts--increases flows into parental co-residence. Moreover, after moving in, delinquency and low credit scores increase time spent in co-residence. We find that the changing debt portfolios of young adults over this period--characterized by rising student loan debt and small declines in credit card, auto and mortgage debt--can predict 30 percent of the observed increase in flows into co-residence, and 26 percent of the observed increase in time spent in co-residence.

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  • Lisa J. Dettling & Joanne W. Hsu, 2014. "Returning to the Nest: Debt and Parental Co-residence Among Young Adults," Finance and Economics Discussion Series 2014-80, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2014-80
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    Cited by:

    1. Brown, James R. & Cookson, J. Anthony & Heimer, Rawley Z., 2019. "Growing up without finance," Journal of Financial Economics, Elsevier, vol. 134(3), pages 591-616.
    2. MAZZOTTA, Fernanda & PARISI, Lavinia, 2017. "What are the Role of Economic Factors in Determining Leaving and Returning to the Parental Home in Europe During the Crisis? Technical Details," CELPE Discussion Papers 151, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    3. Marianne Bitler & Hilary Hoynes, 2015. "Living Arrangements, Doubling Up, and the Great Recession: Was This Time Different?," American Economic Review, American Economic Association, vol. 105(5), pages 166-170, May.
    4. Pinka Chatterji & Xiangshi Liu & Baris K. Yoruk, 2017. "Health Insurance and the Boomerang Generation: Did the 2010 ACA Dependent Care Provision affect Geographic Mobility and Living Arrangements among Young Adults?," NBER Working Papers 23700, National Bureau of Economic Research, Inc.
    5. Jane K. Dokko & Jessica Hayes & Geng Li, 2015. "Credit Scores and Committed Relationships," Finance and Economics Discussion Series 2015-81, Board of Governors of the Federal Reserve System (U.S.).
    6. Eleanor J. Choi & Jaewoo Choi & Hyelim Son, 2020. "The Long-Term Effects of Labor Market Entry in a Recession: Evidence from the Asian Financial Crisis," Working Papers 637, Princeton University, Department of Economics, Industrial Relations Section..
    7. Andra C. Ghent & Marianna Kudlyak, 2015. "Intergenerational Linkages in Household Credit," Working Paper 15-14, Federal Reserve Bank of Richmond.
    8. Lisa J. Dettling & Joanne W. Hsu, 2014. "The State of Young Adults’ Balance Sheets: Evidence from the Survey of Consumer Finances," Review, Federal Reserve Bank of St. Louis, vol. 96(4), pages 305-330.
    9. Cooper, Daniel & Luengo-Prado, María José, 2018. "Household formation over time: Evidence from two cohorts of young adults," Journal of Housing Economics, Elsevier, vol. 41(C), pages 106-123.
    10. Sarena Goodman & Adam Isen & Constantine Yannelis, 2018. "A Day Late and a Dollar Short : Liquidity and Household Formation among Student Borrowers," Finance and Economics Discussion Series 2018-025, Board of Governors of the Federal Reserve System (U.S.).
    11. Christopoulou, Rebekka & Pantalidou, Maria, 2018. "Who saved Greek youth? Parental support to young adults during the great recession," LSE Research Online Documents on Economics 91954, London School of Economics and Political Science, LSE Library.
    12. Lisa J. Dettling & Sebastian Devlin-Foltz & Jacob Krimmel & Sarah Pack & Jeffrey P. Thompson, 2015. "Comparing Micro and Macro Sources for Household Accounts in the United States: Evidence from the Survey of Consumer Finances," Finance and Economics Discussion Series 2015-86, Board of Governors of the Federal Reserve System (U.S.).
    13. Rogers, William H. & Winkler, Anne E., 2014. "How Did the Housing and Labor Market Crises Affect Young Adults' Living Arrangements?," IZA Discussion Papers 8568, Institute of Labor Economics (IZA).
    14. Lisa Dettling, 2016. "Effects of entering adulthood during a recession," IZA World of Labor, Institute of Labor Economics (IZA), pages 242-242, April.
    15. Jeff Larrimore & Jacob Mortenson & David Splinter, 2017. "Household Incomes in Tax Data : Using Addresses to Move from Tax Unit to Household Income Distributions," Finance and Economics Discussion Series 2017-002, Board of Governors of the Federal Reserve System (U.S.).
    16. Nicholas Fritsch & Rawley Heimer, 2020. "Intergenerational Homeownership and Mortgage Distress," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2020(12), pages 1-7, June.
    17. Bucks, Brian & Pence, Karen, 2015. "Wealth, pensions, debt, and savings: Considerations for a panel survey," Journal of Economic and Social Measurement, IOS Press, issue 1-4, pages 151-175.
    18. Lusi Liao & Sasiwimon Warunsiri Paweenawat, 2019. "Alternative Boomerang Kids, Intergenerational Co-residence, and Maternal Labor Supply," PIER Discussion Papers 108, Puey Ungphakorn Institute for Economic Research, revised May 2019.
    19. Maximilian D. Schmeiser & Christiana Stoddard & Carly Urban, 2015. "Does Salient Financial Information Affect Academic Performance and Borrowing Behavior among College Students?," Finance and Economics Discussion Series 2015-75, Board of Governors of the Federal Reserve System (U.S.).
    20. Alvaro Mezza & Daniel R. Ringo & Shane M. Sherlund & Kamila Sommer, 2016. "Student Loans and Homeownership," Finance and Economics Discussion Series 2016-10, Board of Governors of the Federal Reserve System (U.S.).
    21. Samuel Dodini & Jeff Larrimore & Jenny Schuetz, 2016. "What are the Perceived Barriers to Homeownership for Young Adults?," Finance and Economics Discussion Series 2016-021, Board of Governors of the Federal Reserve System (U.S.).
    22. Zachary Bleemer & Meta Brown & Donghoon Lee & Wilbert Van der Klaauw, 2014. "Tuition, jobs, or housing: what's keeping millennials at home?," Staff Reports 700, Federal Reserve Bank of New York.
    23. Cristina Barceló & Ernesto Villanueva, 2018. "The risk of job loss, household formation and housing demand: evidence from differences in severance payments," Working Papers 1849, Banco de España;Working Papers Homepage.

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    More about this item

    Keywords

    Consumer debt; household formation; delinquency; boomerang generation;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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