Goldman Sachs released an interesting investment note to its clients this week. The note was titled “What's Keeping the Kids at Their Parent's Home?” Goldman concludes the job situation is a key factor, with a few other factors tossed in: high student-debt loads, poor credit scores, and rising rent-to-income ratios. It all sounds negative, but it's not.

There are a high proportion of 18-to-34 year-olds living with their parents. The number hit an all-time high after the recession, and the number just began to drift lower last year. This younger demography represents a huge pool of new household formations. (After all, you have to leave eventually, if just to maintain sanity.)  Fortunately, and contrary to some opinion makers, this young demography still wants to own a home, and it wants to own a single-family home, according to Fannie Mae data.  This is good news for the long-term outlook on housing.  There's a lot of pent-up demand in the single-family-home market that will need to be satisfied.

For the time being, though, prices are keeping many first-time buyers on the sidelines. Demand is particularly strong for starter homes, which have been on a tear. CoreLogic reports low-end homes are now priced 5.5% above pre-bubble levels.  Many first-timers have been priced out of the market. 

For the past year, we've been cheerleading for slower home-price appreciation. Entry-level affordability is the reason why.

Information provided by Jessica Regan.

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