Millennials Could Become Big Spenders After All
Millennials are finally starting to spend money. This could not come at a better time for the real estate market and the economy as a whole.
A new Gallup poll shows millennials, in some ways, have become the most optimistic subset of U.S. consumers. In the poll, 51% of 18-to-34-year-olds say they’re spending more this year than last; this is the largest portion out of four different age groups. They’re shelling out more for necessities such as housing and utilities, but also for nice-to-have things including trendy new clothes and leisure activities. “Millennials’ increased spending on discretionary items bucks the overall trend of increased spending on essential items at the expense of discretionary spending,” Gallup notes. Millennials are also “more freewheeling and impulsive” than older folks, which, after all, is what young consumers are supposed to be.
Millennials, you may recall, are the lost sheep of the U.S. economy. They came of age amid financial meltdowns, bank bailouts and futile hunts for dignified employment. Some watched their parents endure foreclosure or bankruptcy while dodging the calls of debt collectors. As they sulk in their parents’ basements, they see the orgy of self-interest in Washington and on Wall Street, and wonder how the United States has managed to survive for 200-plus years.
But millennials are beginning to stretch their legs and stick their heads out. Conventional wisdom holds that young adults aren’t interested in buying homes and cars like older Americans — or else, can’t afford them — but the latest trends show that first-time home and car purchases seem to be rising. Recent analysis by Trulia, for example, shows millennials are starting to buy homes at higher rates, with more growth likely in the future.
Good news beneath the data
The homeownership rate for millennials is still declining, but that may be a contrary indicator that shows good things are happening beneath the data. It’s well-known that a record-high portion of millennials live with their parents. When they move out and rent their own place, they go from being uncounted in the government survey that determines homeownership rates, to being counted as renters, which drives down the homeownership rate. But it’s actually good news when young people move out to live on their own. And sure enough, the rate of new-household formation has been rising this year.
Interest in buying a home is obviously linked to jobs and incomes, which are bouncing back for millennials. The unemployment rate for 18-to-34-year-olds has improved more quickly than the overall unemployment rate, which means young adults — usually more likely to be unemployed — are catching up with the rest of the workforce.
Mr. Kolko of Trulia argues that the most damaged consumers aren’t millennials but middle-aged Americans who bought homes as the housing bubble was forming in the early 2000s, and either foreclosed or ended up suffering a major loss of home equity. That’s the kind of setback that typically takes years to overcome. Millennials, meanwhile, have an opportunity to learn from those financial wipeouts without directly experiencing them — which could end up making them the shrewdest generation in decades.
The GreenHouse Group has seen this millennial growth first hand. We have many young buyers looking in the San Diego area for their first home. If you are thinking about selling we may have a buyer for you. You can contact us directly by calling 858-863-0261 or go to our website. Or if you would like a free housing report just to see what your home would sell for in today’s market I would be happy to send it to you. Just send me a message.
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