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The Millennial Trap

Future Investment or Future Flop?

I recently ran across this article by Catherine Rampell.  The article focuses on the “millennial” generation and discusses the primary fact that today more individual consumers, ages 18 to 31, are still living at home with their parents.  Since I very recently wrote a blog about this same generation and their plight with student loan debt and the inability to get jobs at the levels they were trained and or educated for it seemed very fitting to take the discussion further.  What is most interesting to me about Catherine’s article is that she points out some very interesting and quite frankly, disturbing statistical trends that may be taking place within this generation. As always the question is why?

Point 1:  36% of people (consumers) ages 18 to 31 are living at home with their parents.  This does take into account, college students living in dormitories.  This compares to 32% in 2007.  That’s a 4% rise in 6 years.  That is also over 1/3 of  consumers in this age group.  So why? What does that mean? Is it just the economy?

Point 2:  According to Catherine the statistics show that if you break down that age group even further:  18-24 is at about 56%. Nothing shocking here, as this age group most signifies the traditional college age.  But 25-31 is almost 20% (16%).  This is the consumer who should be traditionally at least renting their own place if not buying their first home. 

Point 3:  This is where the trend turns disturbing. According to the statistics, it is actually people without bachelor’s degrees who are still living at home- 82% (that’s 8 out of every 10 people).  40% have no college experience.  43% have some.  So now I am really asking why?  Are fewer people choosing to go to college period? If so, is it because of the rising cost of an education and or the return of value for that education?  Is it the inability to obtain financial assistance?  Are more people choosing technical schools or some other trade specific program as opposed to the traditional college institution? 

Point 4: Are these statistics equal across gender.  No!  The survey shows that 40% are male while only 32% are female. Also noted again, is that there are fewer of males in college than females.   The scary question here is what are the other 28%? Also noted is that fewer of these consumers are married.  Marriage rate is down almost 4% since 2007 within this millennial age group. Uhm?

Point 5:  Are any of these people working?  Not according to the statistics.  Only 29% are employed.  40% are unemployed.  50% are not even in the workforce. Not sure how they arrive at that figure but that would account for those younger 18-24 year olds who can’t find even part time work.  No work no rent money. No house payment money.  No nada! 

See Article below:

Millennials, in Their Parents’ Basements

By CATHERINE RAMPELL

Dollars to doughnuts.

Last year, a record 36 percent of people 18 to 31 years old — roughly the age range of the generation nicknamed the millennials — were living in their parents’ homes, according to a new Pew Research Center analysis of Census Bureau data. That compares to 32 percent of their same-aged counterparts in 2007, the year the recession began.

And despite the frequent stories of recent college graduates stuck on their parents’ couches (or in their basements or above their garages), it is actually young people without bachelor’s degrees who are most likely to be living at home. The survey data, by the way, counts people who are living in college dormitories as living at home with their parents. Younger millennials (those 18 to 24) are more likely to be counted as living with their parents, partly because they are more likely to be in school. 

Being unemployed is the biggest factor associated with living with one’s parents, not surprisingly. But there are other demographic traits that correlate with living with one’s parents, including being male. Young men are more likely to live at home even though they are now less likely to be in college than young women are.

One reason that both genders have become more likely to live with their parents is that marriage rates have fallen — both during the recession and in the decades before. A very tiny share of millennials live with their parents once they are married (about 3 percent in 2012). In any case, these higher rates of living with parents have contributed to the unusually low household formation seen in recent years.

Jed Kolko, the chief economist at Trulia, recently estimated that low household formation rates had led to 2.4 million “missing households.”  “That’s equivalent to more than two years of normal household formation that have gone missing,” Mr. Kolko wrote. These “missing households” can hold back the economy. With new households, after all, come furniture purchases and other kinds of consumer spending. Mark Zandi, chief economist at Moody’s Analytics, has estimated that under normal circumstances, each formation of a household adds about $145,000 to output that year as the spending ripples through the economy

So let’s see.  To summarize with this “millennial” age group, fewer are in school, fewer are graduating, fewer are getting married, males are worse off than females, and fewer are working.  So is this really just a function of economics, the recession we have experienced over the last 6 years.  Or is this a something bigger. Something more long term- a change in culture and our society.

 As a Realtor Broker obviously I am with all honestly, selfishly concerned as this fundamentality effects our business industry.  But more importantly what does this say about our future as a society and our country?  This generation is our future. They are the next wave of leaders and decision makers.  The next consumers who should be raising families, earning and spending to drive GNP, building business and our economy.  So as a “tail end” member of the baby boomer generation, I say we ( our current generation, our current parents, our current leaders, our current government) better WAKE UP and take a hard look at how to turn this trend around.  If we do not invest our time, energy and resources into our future generation, our greatest natural resource, what will be left?  Let’s all work together to figure this out and do our part to turn “couch potatoes”  into the great minds and producers for tomorrow.

 Stephen B. McClain is the licensed Broker Owner of Cornerstone New Home Solutions.  He is also a certified instructor for the Texas Real Estate Commission under Champions School of Real Estate. He has a career spanning over 30 years in homebuilding and real estate.  He can be reached at smcclain@cornerstonenewhomesolutions.com.