Credit: Oliver Munday

Heard any neighbors complain recently that their 25-year-old has moved back home and is crashing on their couch? That story isn’t uncommon.

Nearly 2 million 18- to 34-year-olds were living with their parents between 2006 and 2010, a 2.7 percent increase, according to “The State of the Nation’s Housing 2012” report, released in June by Harvard University’s Joint Center for Housing Studies (JCHS).

All told, about one in every three Americans under the age of 34 lived with their parents in that five-year span.

Eric Belsky, managing director of the JCHS, remains optimistic that Gen Y will start forming households in the near term—and buying homes in the long term. In between those two milestones lies the apartment industry’s opportunity.

“Surveys consistently find that the overwhelming majority of young adults plan to own a home in the future,” Belsky says. “But many would-be buyers have stayed on the sidelines waiting for the job outlook to improve.”

In 2011, fewer than 700,000 households were formed, well below the 1.2 million or more annual trend expected under normal economic conditions. The key to unlocking all of this pent-up demand is job growth.

“What the housing sector needs is a sustained increase in jobs to bring household growth back to its long-term pace and spur demand,” says Chris Herbert, director of research at the JCHS. “The country has seen new household formations fall well below expected long-run rates due to a falloff in young adults being able to move out on their own.”

Declining immigration numbers also contributed to a drop in household growth from 2007 to 2011. Yet, Gen Y is expected to be the most diverse generation in our nation’s history. The report estimates that between 2010 and 2020, seven out of 10 new households will be identified as what we currently call “minorities.”

Even under a low-immigration scenario (in which only half of the Census Bureau’s projections come true), the Joint Center expects Gen Y to number 85.1 million by 2020, a key contributor to the more than 1 million new households projected to be formed annually during the 2010–2020 period.

So, the bad news is that the multifamily industry has yet to fully benefit from the maturation of Gen Y. But given today’s healthy rental increases, that also happens to be the good news.