March 25th, 2014 12:16 PM by Nick Rapplean
The topic is the Millennial Generation (or Generation Y-ers), young Americans whose ages fall somewhere in the range of 16 to 34 years-- a huge group of people whose influence on our economy is likely over time to rival that of the Baby Boom generation, which we'll talk about soon, as its members go through the decision-making process that precedes or accompanies early retirement. That, without a doubt, will be a momentous process for our real estate market, as the Boomers help define the home designs-- and lifestyles of those living in them-- for retirees who will most likely be far more active than their parents and grandparents.
I want to start in perhaps an unexpected place the way the members of the Millennial generation are (or, more importantly, aren't) buying new cars.
Now, this used to be a central part of the American Dream. New car in the garage of the starter home in the suburbs. But several unexpected things have been happening. As Derek Thompson and Jordan Weissmann noted in The Atlantic, "In 2010, adults between the ages of 21 and 34 bought just 27 percent of all new vehicles sold in America, down from the peak of 38 percent in 1985. Miles driven are down, too. Even the proportion of teenagers with a license fell, by 28%, between 1998 and 2008. Rick Newman, of Yahoo! Finance, notes that the number of people aged 16 to 24 with licenses is now below 70% for the first time since 1963."
The obvious question? What's going on?
Purchases of new cars have declined greatly in this age group, yet the success of the car-sharing company ZipCar continues to grow, suggesting that cars don't have the status appeal to members of this generation that they did to their parents.
Clearly, attitudes toward money are changing among the Millenials. It will take time to sort out which attitudes will hang on, which will fade the moment the economy-- particularly the jobs market-- improves, and which car and home designs will prove attractive to these thrifty buyers.
Note that the national unemployment rate is 7.5%, but it's 16.1% for 16-to-24-year-olds. Here's a tentative conclusion. Young people, who saw savings get wiped away and homes go through unexpected foreclosures during the recent housing bust, are strongly affected by the negatives they saw and financial security is one of the top priorities for many of them at this point.
Intriguingly, this isn't making them good investors; it's making them good savers. Their standards are more like Ben Franklin's. A penny saved is a penny earned.
And there are a lot of pennies to be saved, potentially, by living with parents, holding off on the purchase of a car, and waiting as long as it takes to feel they can buy their own home comfortably.
Indeed, a study by UBS very recently declared that the Millenials are the most financially conservative generation since the Great Depression.
So sellers of goods and services will want to offer products, ideas and services that enhance personal security if they want Millenials to open their wallets. Since these young people are generally great believers in education, one of the things that loan officers and real estate professionals can offer are classes, workshops and seminars that help them learn still more about handling their money conservatively and making it grow with low risk.