What a difference a few decades make!
When I was coming out of college, armed with an M.B.A. and lots of angst about the future, one of my most critical goals was to save up enough money to actually buy a home. There was something very comforting in the thought of actually owning land. It didn’t happen right away. In fact, it was four years before we had saved enough to actually make a down payment on a $71,900 three-bedroom, 2-bath home in Oldsmar, Florida. Now, this was in the early 1980’s and, believe it or not, we had a 17% mortgage interest rate on that place! So, it was not surprising that I had my share of “angst!”
And, honestly, we had no earthly idea of how we were going to make the payments each month – they were so much higher than we had been paying renting an apartment! But, somehow, you find the money, make your mortgage payment and you go forward building a family and a life.
I suspect that many of you are nodding your heads right now recalling your own foray into home-ownership. It was terrifying and exhilarating at the same time. But, it had also been drilled into our generation (the “Baby Boomers”) that owning your home was the very first step toward financial independence!
Well, fast forward about 40 years, and the mentality of owning a home has remarkably changed. The “Millennials” are the first generation to re-think the whole concept of owning a home. It could be the high cost of a new house. The median price of a new home in 1981 was $68,900 . . . last year is was $298,000 (US Census Bureau). It certainly isn’t high interest rates – today’s are still near record lows. But I think there may be something else causing this interesting phenomena.
Millennials like their mobility.
They don’t work for the same company for forty years, they marry and have children later in life, and they like to keep their “powder dry” in case an opportunity comes up that would allow them to move to one of their favored locales – like Austin, San Diego, Denver or Nashville.
Sandye and I live in the city of Atlanta, just south of Midtown, and we are surrounded by one apartment complex after another. Thousands of units, all, it appears, rented to 20 and 30-something young adults who like the amenities that the city has to offer (bike paths, restaurants, parks, bars, etc), without the financial burden of owning a home. Not only that, but a lot of them would prefer a more urban environment than the massive flight to the suburbs that most of us were a part of, starting in the early 1950’s and continuing well into the 1990’s.
No, a lot of today’s younger generation has neither the loyalty to their employer that we had, nor the desire to plant “roots” in any one particular community. And this has created an apartment building boom that stretches all across the country. And, not just utilitarian apartments, but luxury models with hardwood floors, Wi-Fi, exercise and recreation facilities and common areas where they can aggregate as a “community.”
And, what is fascinating to me is that, just as Baby Boomers changed the way that society evolved, including not only housing patterns, but the way we shop and the types of recreation we enjoy, so too will this generation. So, we as investors, should probably pay a little more attention to this generation than we might like to, because they will, indeed, change the world.
Let’s just hope they’re not doing it from one our spare bedrooms!