When they come off of the sidelines, they will be different.
One of the biggest drivers of the sluggish U.S. housing recovery has been the fact that Millennials – the 80+ million consumers reaching young adulthood around the year 2000 – have been sitting on the sidelines. “This recovery is virtually millennial-free,” says financial journalist Vera Gibbons. This phenomenon is important, since Millennials make up 20% of the affluent consumer base in the United States.
Granted, those affluent Millennials with $100k incomes spend differently than their counterparts who are unemployed or under-employed. But I suppose my point is this: As go Millennials, so goes the economy.
The reasons for their struggles are well-documented. They are saddled with student loan debt, with about two-thirds of all school loans owned by those under the age of 40. About 22% of 30-year-olds who had student debt also had home loans, down from almost 34% in 2008, according to the Federal Reserve Bank of New York. They suffered the most during the recession, often as the most recently hired and therefore the first to go during downsizings. That’s why so many live with their parents.
The outlook for the coming years is mixed. Some analysts predict that homeownership among this segment will remain low (or continue to fall) as Millennials postpone marriage and building families. Others see a slow recovery, but a different kind of demand of housing stock, such as multi-family homes closer to urban centers. Still others are more optimistic, according to a recent piece in Bloomberg. In it, the authors write, “in the next two to five years, these Americans will gain greater access to housing, lifted by higher levels of education and a stronger labor market, according to interviews with about a dozen economists and housing analysts.”
Bloomberg notes that first-time home buyers are critical for the housing market, since they set off a chain reaction of sales, allowing other homeowners to trade up: In May 2014, “about 27 percent of total existing home sales involved first-time buyers compared with an average of 35 percent since October 2008, according to the National Association of Realtors.”
I tend to believe that they’ll be back, even if their purchase behavior will have dramatically changed. Fannie Mae recently published a survey that found that 90% of renters under 40 indicated that they want to buy a home eventually.
They want to own a home, but after taking note of the struggles of their parents and friends and paying-down their own debt, they will be more deliberate, strategic and intentional about the way they buy and furnish their homes. In the current economy, it’s too easy for marketers to write-off Millennials. Do so at your own risk.
They are, and will increasingly be, important to the long-term success of high-end brands. So now is the time for you to get to know them better.