Landmark Links September 22nd – Myth Busters


Lead Story…. There are few forces on earth more powerful than that of mean reversion. I’ve written about common media narratives regarding Millennial preferences quite a bit since I started this blog.  Since the beginning of this cycle, the US media has latched on to a juicy narrative that was too good go pass up – that Millennials were unlike any other prior American generation and would forego things like home ownership and car ownership “forever” in favor of renting, mass transit and ride sharing.  I’m really not sure where this view originated.  Chances are that it was someone or a group of people with an ax to grind against suburban sprawl who saw that Millennials were increasingly foregoing home and car ownership.  Rather than investigating the underlying causes, they simply attributed these life decisions to reasons that fit their pre-existing biases.  Media outlets took the bait and the Millennial-as-perpetual-urban-renter theme became accepted as fact.  For several years, John Burns Real Estate Consulting (and others) have pointed out the fallacy of this thinking – there is a critical difference between what someone would like to do and what they are actually doing.

In the years following the Great Recession, Millennials did indeed rent in the city and forego purchasing cars in droves.  However, as this generation has aged, it’s behavior is reverting to the mean just as it did with previous generations.  Two stories came out this week that helped clarify the difference between what young people are doing with regards to home ownership and what they would like to be doing.  The first was from Daniel Taub at Bloomberg who referenced a joint study by the National Association of Realtors and non-profit American Student Assistance that found that heavy student debt loads delay home purchases by 7 years on average (emphasis mine):

The typical student debt load for millennials in the U.S. is $41,200, surpassing their median annual income of $38,800. One impact of that burden: first-time home purchases are being delayed by seven years.

That’s according to survey results released Monday by the National Association of Realtors and the nonprofit group American Student Assistance. Only a fifth of millennial respondents own a home, with 83 percent of non-owners citing student debt as the reason they aren’t buying. Among those who do own, 28 percent said they’d sell their current home and purchase a better one, if not for student loans.

It’s difficult to buy a home when debt service on student loans eats up so much of your income and potential down payment savings.  This is a problem that previous generations didn’t have to deal with at nearly the same scale.  However, young people are still buying homes (and SUV’s for that matter) once they form families and start having kids.  They are just going through these rights of passage later than previous generations did.  Another story from NPR’s Emily Sullivan and Sonari Glinton pointed out that older Millennials are buying suburban homes and SUVs, just as previous generations did and completely counter to the Millennial-as-perpetual-renter narrative (emphasis mine):

But now, as millennials get older — and richer — more of them are buying SUVs to drive to their suburban homes.

The National Association of Realtors’ 2017 Home Buyer and Seller Generational Trends study found that millennials were the largest group of homebuyers for the fourth consecutive year.

Zillow’s chief economist, Svenja Gudell, says that for millennials, growing older is beginning to mean buying a house in the suburbs.

The Great Recession acted as a pause button for many choices that Gudell says millennials were already going to be slow to make.

“We’re seeing that the age at which women have kids has also gone up. And so instead of having children in their late 20s, you might start having kids when you’re in your early 30s at this point,” she says.

Generationally speaking, the stereotype of millennials as urbanites falls flat when it comes to home ownership. The Zillow 2016 Consumer Housing Trends Report found that 47 percent of millennial homeowners live in the suburbs, with 33 percent settling in an urban setting and 20 percent opting for a rural area.


Michelle Krebs, an executive analyst at Autotrader, says college debt kept millennials out of the car market, but now that’s changing.

In 2011, millennials were just 20 percent of the market. They’re about 30 percent now, and Krebs says that they’ll be 40 percent of the market before the next decade if current trends continue.

Erich Merkle, an economist with Ford, says that as millennials cross the threshold into family life, they’re buying large SUVs.

“We expect them to carry on as they age with three-row SUVs and likely go larger simply because they need the space to accommodate children that are now teenagers or preteenagers,” he said.

Ford expects all SUV sales to grow from 40 percent to more than 45 percent of the total U.S. new vehicle market within the next five to seven years.

Millennials just might be mainstream after all.

Young people increasingly moving to the suburbs and purchasing SUVs both fit nicely with the demographic trend that my favorite chart from Calculated Risk illustrates:


As Millenials age, they are acting exactly as previous generations acted – just a few years behind due to student debt and the unfortunate reality of coming of age during the Great Recession.  Look for this mean reversion to continue as the 30-39 year old age group grows dramatically over the next decade or so.  Deferring home and car purchases due to personal financial limitations may not be as sexy to write about as a sea change in attitudes amongst an entire generation towards two bedrocks of American society. However, it is a far simpler explanation and, per the actual data, also has the advantage of being the correct one.


Tale of Two Demographics: New data shows that retirees are on the move but young people are increasingly staying put.

Warning Signs: The next financial crisis is far more likely to be brought on by untested and largely unregulated Silicon Valley fintech startups than by Wall Street.

It’s Been a While: The incremental bump in US incomes that we have been experiencing of late does not erase the 50 years of stagnating wage pain that preceded it.


Leveraging Up: Interest from bond investors is prompting publicly listed mall owners to issue debt at record levels this year even as equity investors rush for the exits.

Winter Wonderland: Landlords are tying to turn under performing open-air shopping centers into winter hangouts complete with skating rinks, fire pits and programmed entertainment in an effort to drive foot traffic in colder months.

Short Commute: Not driving to work is the new high end job perk and the more that you make, the less likely you are to take public transport.


Whatever It Takes: A new startup called Loftium will give you up to $50,000 to put a down payment on a house but only if you agree to continuously list an extra bedroom on Airbnb for 1-3 years and share income with them during that time.

Tightening: Bank financing for residential acquisition, development, and construction suggests that banks are getting more selective.


Virtual Roller Coaster: Bitcoin’s wild ride shows the truth – it’s value depends on it becoming digital gold or being used by criminals – and that value is most likely zero. See Also: Bitcoin has become all about the payday, not its potential.  But See: What Jamie Dimon gets wrong about Bitcoin and Tulips.

Disappearing Act: The fascinating post-baseball story of former Giants super star pitcher Tim Lincecum, as reclusive an athlete as you will ever find

Chart of the Day

Some housing stats from The Daily Shot

Existing home sales dipped again, missing economists’ forecasts. Affordability is becoming more of an issue.

Source: Piper Jaffray

Most housing analysts blame these slowing sales on shrinking inventories. Home listings are seasonal, and for this time of the year, the availability of houses for sale is the lowest since the 90s.

Source: The Daily Shot


Truth Serum: A new survey of British plant eaters has found that one in three vegetarians eat meat every time they’re drunk on a night out because not eating meat sucks.

Over Confident: A shaman was killed while swimming in a crocodile invested lake in Indonesia.  He jumped in there in an effort to prove his  supernatural control over crocodiles after a villager had been killed the previous day.  The whole ordeal was caught on video.  It’s easy to say in retrospect but this was probably a bad idea.

Good Samaritans and Better Headlines: Topless car wash raises cash for deputies wounded in gun battle at Rastafarian pot farm

Gotta Hear Both Sides: A Colorado Springs woman is wanted for questioning by local police after having been spotted pooping on a family’s lawn multiple times.  The manager from the local Chipotle was unavailable for comment.  (h/t Dave Landes)

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

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Landmark Links September 22nd – Myth Busters

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