You may have recently heard about the nepo babies phenomenon, which is the discovery that many successful people in Hollywood are related to other famous and successful people. Shocking! You’re telling me the spawn of super attractive, talented and rich people also wanted to go into the industry that made their parents super rich and famous and used any connection they had to do it? So weird. But honestly, did we really think Kaia Gerber was going to be an accountant? Her mother is Cindy Crawford!
But we can’t just cast blame on the nepo babies of the Hollywood and other industries. Plenty of normals are also using their parents in different ways. Recent data shows that many 20-somethings are living at home in order to save money and by saving money it turns out they use the money that would go to rent, utilities, food and laundry for luxury items. Who cares if you are living in the basement if you have a Bottega Veneta Jodie bag. Is this just a sign of the times or could this be the new normal?
Here’s why young adults stay at home and what this means for the economy.
According to recent data from the U.S. Census Bureau, almost 50% of Americans between 18 and 29 live at home with their parents. Boomerang kid numbers like this have not been since the Great Depression. More men than women live at home with their parents, but that trend has remained constant over the past few decades.
In 1967, 70% of those 18 or older lived with a spouse. Compare that to today; only 50% of these people live with a partner. This could show that there is less emphasis on getting married young and a stronger emphasis on developing a career in the current climate. The number of unmarried couples has climbed by over 6 million since 1996, with around 75% not having children.
Of the people living at home, only 40% are getting charged rent by their parents, and half of those people are paying less than $500 per month. When the national median rent for a one-bedroom apartment is $1,454, living at home saves thousands of dollars a year.
But for every luxury buying adult living at home there is one struggling to pay off their debts. One in five adults between 18 and 24 with a credit file in the U.S. currently have debt in collections. If you need help managing your debts consider debt consolidation.
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What does this mean for the luxury industry?
Several factors can influence why the luxury lifestyle seems to be getting younger and younger. Social media plays a massive part in enticing young people to aspire to materialistic possessions. Saving money on rent and groceries can free up a lot of disposable income and allow young adults to make these purchases they have been dreaming of/TikTok says they must own or they are not a person.
In 2018, Millennials and Gen Z accounted for 40% of luxury sales in North America and 44% worldwide, and this number is expected to increase substantially in the coming years. Around 78% of Gen Z already follow at least one luxury brand on social media, so it is easy to see where their focus is. These people also follow influencers sharing their thoughts on the future of luxury and which companies are worth investing in. These influencers are very powerful and are reshaping how luxury businesses operate. Luxury brands have noticed and partnered with YouTube and TikTok stars to get their audience to shop at their stores. It certainly didn’t look like this for the young adults that were living at home during The Great Depression!
24.8% and 35.8%
of people under 25 and people between 25 and 29 own homes respectively.
Other factors to consider
Of course, young adults are not choosing to live at home solely to buy a new Chanel bag. Inflation plays a large part in these numbers, as well as high rental costs and expenses to go to college. Inflation reached record highs in 2022, making it difficult for the average person to make ends meet. Many people living with their parents are only doing so out of necessity–they simply cannot afford rent.
When the housing market is extremely hot, demand is high, and interest rates are going through the roof, these young people cannot afford to buy a home. This leads to an increase in demand for rental units, especially in large cities, which also shoots those prices up.
Where else is this happening?
This phenomenon is not only occurring throughout the U.S. In England, 42% of young people live at home, which is the highest percentage since they started keeping data on this in 1996. At the same time, imports of luxury Swiss watches to the UK increased by 31%. These watches cost, on average, $7,100, while mid-range watches saw a decrease in sales.
Similarly, Burberry reported an 11% increase in sales, and LVMH, the parent company of Dior and Louis Vuitton, among others, reported a 19% increase in revenue. Many thought luxury brands like these might be a dying industry, but they quickly bounced back during the COVID-19 pandemic. When governments provided assistance to help people during the pandemic, a huge chunk of credit card debt was paid off, and people had more money to purchase from luxury brands.
Social media tells young people they need luxury goods. When saving on major expenses, they can invest in this market where they were not able to before.
No matter the reason, young people live at home much more today than at any other point in the last century. Luxury brands are reporting large increases in revenue year over year, and young people account for a considerable percentage of that. It is unclear where the future is headed, but luxury brands are not going anywhere.