Young Adults Have Fewer Homes And Cars, Less Debt—CUNA News Now, Mar. 1

Since the Great Recession, young adults have bought fewer homes, purchased fewer cars, and accumulated less debt than they did before the recession, and they are shedding debt faster than older generations, says a Pew Research Center analysis of government data.

For credit unions, this may mean delayed gratification in lending to this group. It also means an opportunity to build relationships with young adults before they get to the end zone in taking out larger loans.

This shedding of debt is an about-face from pre-recession years, when adults younger than age 35 racked up record debt-to-income debt, according to the report, which the Washington, D.C.-based Pew released on Feb. 21. Since the recession, they have shed that debt at a faster rate than older adults-- not because they are paying off the debt, but because they aren't taking on any new debt, including houses and cars.

Pew analyzed Federal Reserve Board and other government data for the report.  It found:

  • The median debt in young adult households dropped 29%  from 2007 to 2010. That compares to an 8% drop among households headed by adults age 35 and older for those years. The share of younger households holding any kind of debt fell to 78%--the lowest level since the government began collecting that data in 1983.

  • Young adults' decline of debt during tough economic times is driven largely by the shrinking percentage of this group who own homes and cars. However, it also "reflects a significant decline in the share who are carrying credit card debt," said the report. This group's credit card debt was 39% in 2010--down from 48% in 2007.

  • Young adults carried more student loan debt after the recession. In 2010, 40% of young adults surveyed owed on a student loan, an increase from 34% in 2007 and 26% in 2001. However, the median owed was less in 2010--about $13,410--than the $14,102 owed three years earlier.

  • Younger households who owned their primary residence fell to 34% in 2011 from 40% in 2007.  The drop accompanied a decline in households with debt secured by residential property. In 2010, their median residential property debt totaled $128,000, compared with $150,000 in 2007.

  • In 2011, roughly 66% of adult households headed by an adult younger than 25 had either a leased or owned vehicle. That compares with 73% four years earlier. For households headed by adults younger than 35 years, 32% owed vehicle debt in 2010, compared with 44% owing that debt three years earlier. The vehicle debt amount also fell--to $10,000 in 2010 from $13,000 in 2007.

  • Younger households pared their credit card balances. In 2010, about 39% carried a balance, down from 48% in 2007 and 50% in 2001. The median owed fell to $1,700 in 2010 from $2,500 in 2001.