Landmark Links March 10th – Misunderstood

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Lead Story… The attitudes of Millennials towards housing are written about endlessly but are chronically misunderstood for a handful of reasons.  Among those reasons are:

  1. The Millennial generation is the largest generation in American history.  As such, it is extremely diverse and does not fall neatly into a one-size-fits-all stereotype.
  2. Most media outlets are based in and around major urban centers where renting tends to be more popular with young people than it is in the nation as a whole.  The close proximity of media outlets to cities means that urban trends tend to be somewhat over-sampled when it comes to demographic stories.  The lifestyle of the stereotypical skinny-jeans-wearing, neck-bearded Millennial gets more attention because he’s what writers actually see, whether he is reflective of the group as a whole or not.
  3. It’s easy to misconstrue desires with choices.  Just because someone chooses to live in a 300sf studio apartment doesn’t mean that was their preference.  It may be the option that they settle for.

The resulting confusion created by the factors outlined above means that much of what you read about Millennials and their housing preferences are a triumph of narrative over real scientific evidence.  In fact, when actual studies are conducted, they frequently find that Millennials would like to own homes but often can’t afford to in many areas where they want to live due to high prices and poor finances.  Recent studies from Harvard and Zillow are the latest to confirm that Millennials do indeed want to own homes but may not have the finances to afford them.  Philip Molnar of the Los Angeles Times summed up the studies (Emphasis mine):

Reports by Zillow and Harvard University break with stereotypes of America’s largest generation, namely that they prefer to rent because they favor experiences over building equity and want to live in urban environments.

Millennials make up about 10% of the nation’s homeowners. Nearly half of those were in the suburbs in 2016, 33% in urban areas and 20% in rural places, said Zillow’s Group Report on Consumer Housing Trends. The report used U.S. census data and a Zillow survey of more than 13,000 home buyers, sellers, owners and renters.

Of millennial buyers who moved in the last year, 64% stayed in the same city and just 7% moved to a different state, the Zillow study said.

I found this passage from the Harvard study particularly interesting (emphasis mine):

“The evidence suggests, however, that homeownership decisions by younger households have much more to do with affordability than location and lifestyle preferences,” study authors said.

The Harvard study found homeownership rates for millennials were 5% higher in metro areas where median home prices were 20% below the national median. The idea was that if millennials could afford to buy a home, they would, and did so in low-cost markets such as Birmingham, Detroit, Minneapolis and St. Louis.

Yes, it’s true that Millennials have a historically low home ownership percentage as an age group.  However, that appears to have more to do with finances and housing affordability issues than it does with attitudes towards housing.  This is not to say that the influx of young professionals into urban areas isn’t real – it clearly is and the impact has been substantial.  Just be careful what you attribute that influx to.

Economy

What if I Told You…. There is growing evidence that everything that the market thinks about inflation may be wrong.  See Also: The best predictor of inflation is actually past inflation.  And: Economic growth expectations are quietly vanishing.

Unintended Consequences: Swedish residents are substantially over-paying their taxes as a pragmatic way to avoid negative interest rates.

Out of Balance: This is a fascinating visual depiction of how poor the post-recession recovery has been in the middle of the country versus along the coasts.

Commercial

Anchors Aweigh: Malls are so desperate for anchors that they are now courting grocery storesSee Also: The saddest mall on earth – how one struggling mall in Virginia replaced storefronts with vending machines.  And: It’s really getting challenging to come up with a bullish thesis for shopping mall REITs.

Residential

Too the Moon: The Fannie Mae Home Purchase Sentiment Index is now at an all-time high despite rising mortgage rates.

Tug of War: The Coachella Valley is locked in a political battle between old guard residents and new short-term rental landlords that will shape it’s future.

Profiles

The Future is Now: Here are the ten most impactful new technological breakthroughs for 2017.

Exclusive Club: Hook up app Tinder now has a secret, invite only section for certain users (CEOs, super models, and other hyper-attractive/upwardly affluent types).

Battle Lines: Venice has become ground zero for gentrification battles as the quirky LA beach town deals with new tech wealth and a booming homeless population.

Chart of the Day

The Relative Growth Performance of the Housing Sector Moves with Mortgage Rates

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Source: Federal Housing Finance Agency, Goldman Sachs Global Investment Research

WTF

Porn Again: Meet the porn star who quit her $300k a year adult film job to become a pastor.

Meanwhile, In Florida: Someone left a 5-foot long, dead shark in a shopping cart outside of a Walmart because, Florida.

Colorful Side Effect: Just in time for Easter, Oreo came up with a Peeps flavored cookie that turns your poop bright pink.  I’m going to run out and buy a box ASAP to see if this is true.

Peak Russia: A new Russian reality TV show based on the Hunger Games is currently in production.  The participants “have all signed a release of liability for injury, as well as death waivers, in addition to agreeing to not hold the organizers accountable if they were to commit a crime during filming.”  It also involves criminals being released from a local jail and bears.  This has to be the most Russian thing ever.

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

Visit us at Landmarkcapitaladvisors.com

Landmark Links March 10th – Misunderstood

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