Millennial Homeownership and Richmond Manufacturing - July 24, 2018
Millennials Aren't Buying It
A little over a year ago, there was a kerfuffle when the low levels of homeownership among millennial was explained to be a consequence of their expensive habits, particularly “smashed avocado for $19 and four coffees at $4 each”, which was justified by previous data that boomers spend 40% of their food dollars eating out, while millennial spend 44%. However, recent data from a St Louis Fed paper suggests there are other factors at work. The paper asks:
“Will the typical family that was young or middle-aged at the time of the Great Recession become part of a “lost generation” that struggles to achieve life cycle milestones?”
This suggests that there may be more than expensive breakfast habits holding millennials back:
“Alone among the six decadal cohorts we studied, the typical 1980s family lost ground between 2010 and 2016, falling even further behind the typical wealth life cycle.”
Additionally, with their wealth falling behind equivalently-aged families from previous decades, millennials are also facing housing prices that are at or near all-time highs, with affordability, which takes into account wages and interest payments, at levels last seen in the inflated days of 2008. Add to these conditions the fact that “68% of Millennials have buyer’s remorse” (and are probably talking to their friends about their woes) and it is unlikely that Millennials will be the ones to turn the tide of declining existing home sales, which are now in their third consecutive month of year-over-year decreases.
As an aside, it appears that millennials are not alone in feeling the pinch, with 22% of Americans questioned in a recent survey saying that high home prices were a leading reason not to buy.
The Richmond Fed released its Survey of Manufacturing Activity data today and two trends we are following, particularly labor tightness and price increase, continue to have a strong pulse. First, the summary noted that,
“Respondents expect growth in prices received to continue to accelerate in coming months but anticipate a slowing in growth of prices paid.”
Second, the Availability of Skills Needed tied for the worst reading in the Index’s history at -16. While there’s no telling how long these trends will continue with the ongoing political turbulence around trade, firms “expect this struggle [to find workers with the skills they need] to continue in the next six months” and our eyes will be on the BLS’s Employment Cost Index when it is released next Tuesday, as it tracks both benefits and wages, providing a good look at labor market conditions.