Landmark Links September 9th – Misunderstood

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Lead Story… I doubt that any generation has ever been hyper-analyzed the way that Millennials have.  You can’t turn on the TV, read a news website site or open a newspaper (yes, some people still read them) without coming across an opinion piece purporting to know everything about Millennials: how to make them happy at work, where they want to live, how they want to shop, etc.  Much of it reads as if the people born between 1980 and 2000 are some type of exotic beings that are to be observed in their natural setting to understand how their species live.  Spare me.  I’ve long suspected that most of this is BS and that Millennials aren’t really that different from previous generations.  Most of the actual survey data that I’ve seen confirms this to a large extent.  This past weekend a collegue sent me the link to a study done by CBRE appropriately titled: Millennial Myth Buster: Young Americans Do Like the Suburbs (h/t Tom Reimers)  In this report, CBRE’s research group dug into actual migration and census data to show where Millennials are actually moving as opposed to where conventional wisdom says that they are moving (emphasis mine):

The most recent available annual data (2014) show that 2.8 million people moved from the suburbs to cities that year; however, 4.6 million did the opposite.1 Since this runs contrary to the prevailing narrative about urbanization, it’s worth digging into the data to see what’s behind these numbers.

There are many ways to look at domestic migration——age, education and profession are all useful in breaking it down. In recent years, media stories have frequently focused on the role of millennials——those born between 1980 and 1995, roughly——in driving the resurgence of downtown areas. The focus on this generation was not unwarranted; millennials are now the largest age group in the country and make up the largest segment of the U.S. workforce. It is fair to say, however, that census data disagree with the media on where millennials actually live and where they have been moving to.

Approximately 30% of millennials live within urban areas. The other 70% do not appear to be rushing to move downtown: In 2014, 529,000 people between the ages of 25 and 29 moved from cities to the suburbs, while only 426,000 moved in the opposite direction. For younger millennials aged between 20 and 24, the flow’s direction was even more pronounced, with 721,000 moving out of cities for the suburbs and 554,000 leaving the suburbs to pursue life in the city. It’s true that some of those moving to the suburbs were returning to childhood rooms or basements in their parents’ homes, but the migration trend still holds: not every millennial can or wants to live downtown.

Ok, so that’s just one year but the data has actually been remarkably consistent over time. This is one case where the facts are 180 degrees away from the narrative.  The US is getting more suburban, not more urban.  CBRE’s conclusion was particularly interesting as it pointed out that younger people often want urban amenities but still a suburban setting (emphasis mine):

The remarkable discrepancy between population data and the prevailing narrative raises questions about the preferences of young people in the U.S. What do they want? Simply put: space and an urban feel. One recent survey showed that 81% of young people (defined as millennials and those born in the late 70s) want three bedrooms or more in their residence. Their responses regarding geography reflected this preference: two-thirds of respondents stated a desire to live in the suburbs, while only one in ten wanted to live in a city center. Such findings are corroborated by the results of another survey, in which nearly two-thirds of millennial-aged respondents self-identified as suburbanites or rural people.

Still, millennials have a reputation for appreciating the perks of urban life, such as easy access to public transportation, shops, restaurants and offices. This does not necessarily translate into demand for downtown real estate, however. Suburbs too, can develop in ways that appeal to younger demographics, by incorporating elements of urban life in suburban areas. This is occurring in metros across the country. New terms have even been coined to describe quasi-urban areas in the suburbs——among them, ‘‘hipsturbia’’ and ‘‘urban burbs.’’

I highly suggest reading the entire piece.  IMO, the reason that the media gets this wrong is that urbanization is primarily happening in the areas where they tend to be based: NY, LA, SF, DC, etc.  Influencers live in these places, witness urbanization occurring and assume that it’s happening everywhere else as well.  These large, wealthy, mostly coastal cities do not look like the rest of the US from a demographic standpoint and their demographic trends shouldn’t be extrapolated to everyone else.  I hate to break it to many of you but the average Millennial isn’t a mustachioed hipster wearing skinny jeans and drinking organic kombucha in a Brooklyn organic juice co-op.  He or she actually looks a whole lot more like you and I than we’ve all been led to believe.

Economy

Changing Tune: Barry Ritholtz of Ritholtz Wealth Management, The Big Picture Blog and Bloomberg View was a critic of banks as a risk to the US economy long before the crash in 2008.  Now that the crisis has been over for several years, he’s finally giving the all-clear as banks have finally deleveraged a bit and refilled the FDIC’s deposit insurance fund.  See Also: A longtime proponent of financial industry regulation thinks that regulators may have taken things too far in the wake of the Great Recession, leading to mountains of red tape and rising compliance costs.

Full Turn: Inequality in the US used to be most evident in the South.  Today, it’s most pronounced along the coasts.

Eating Well: How foodie culture defied expectations and not only survived but thrived post-recession.

Commercial

Slip Sliding Away: Walmart killed off rural downtowns when they started offering goods for cheaper prices.  Walmart’s position has been steadily eroded in recent years by big box stores like Costco and e-commerce, primarily Amazon.  Two interesting related stories this week:

  1. Costco is struggling as online bulk shopping provides strong competition. (h/t Mike Nash)
  2. Amazon, which is a primary culprit in the decline of Walmart, big box stores and malls is now starting it’s own delivery fleet, which could pose an existential threat to UPS and FedEx.

Residential

If Headlines Were Honest: Alternative headline from Bloomberg early this week: Housing Boom to Keep Going Even if Rates Rise Says CEO of Highly Levered Public Home Building Company.

Staying Away: Beazer made a tender offer to buy back $300MM in debt due in 2018 in yet another example of public builders spending money on pretty much anything except for land.

Profiles

Explains a Lot: Florida resident Dave Barry recently wrote a book about his freak-show of a state, a portion of which was excerpted by the Wall Street Journal last week in a well-titled article called – Florida: The Punchline State.  I recommend that you read the whole thing if you consider yourself a connoisseur of weird Florida news.  My favorite excerpt (emphasis mine):

The point is that, yes, Florida, because of its unique shape and warm climate, does have an unusually high percentage of low-IQ people doing stupid things, frequently naked. But most of these people came here from other states, the very same states that are laughing at Florida. Those of us who live here have to contend with not just our native-born stupid, but your stupid, too. We are like Ellis Island, except instead of taking the huddled masses yearning to breathe free, we take people who yearn to pleasure themselves into a stuffed animal at Wal-Mart.

House of Cards: Some Great investigative reporting from Nick Bilton of Vanity Fair on the downfall of Theranos and founder Elizabeth Holmes.

Can You Hear Me Now: New study finds that your dog knows exactly what the hell you are talking about.

Chart of the Day

Myth Busters – Urban Migration Edition

Millennials in the Suburbs 1

WTF

Swedish Meatballs: A guy got his testicle stuck in an ill-designed Ikea chair and took to Facebook to complain about it (h/t Mandy McDonnell)

Inside Joke: North Korea just banned sarcasm. Seriously.

Bad Selfie: A battery suspect was apprehended after he used the police department’s “wanted” poster as his new Facebook profile picture, because Florida.

Misdirected Anger: A woman who was angry with her ex set the wrong car on fire,  because, once again, Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links September 9th – Misunderstood

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