The typical older Black millennial has 17 times less wealth than white peers, and student debt may be why

Millennial
The millennial racial wealth gap persists.

Older millennials born in the 1980s are making a wealth comeback, but there’s a vast racial wealth gap lurking underneath this progress.

In 2016, older millennials’ wealth levels were 34% below where they should be if the Great Recession hadn’t occured, per a 2018 study by the Federal Reserve Bank of St. Louis. Within three years, the first part of a new St. Louis Fed study found, they had narrowed that wealth deficit down to 11%.

However, the second installment of the Fed’s study reveals that these strides look quite different when broken down by race. While white and Hispanic families saw improvement in building wealth, the study states, Black families experienced the reverse as they fell further below wealth expectations between 2007 and 2019.

From 2016 to 2019, white families of this older millennial cohort saw wealth levels go from 40% to 5% below where they should be. That wealth deficit doubles to 10% for Hispanic families, but that is still less than their 2016 wealth deficit of 15%. The deficit soars for Black families, who were 52% below wealth expectations in 2019 – a significant increase from 39% three years prior.

These differences look just as staggering when framed as median wealth for the same year. For older white millennial families, that’s $88,000 – four times the $22,000 median wealth for Hispanic families and roughly 17 times the $5,000 median wealth for Black families.

The report doesn’t take into consideration effects from coronavirus recession, as full data for that period isn’t yet available.

Black millennials bear a bigger student debt burden

Despite these wealth differences, the St. Louis Fed found that all three groups had income levels that aligned with expectations, indicating that earnings weren’t preventing wealth accumulation.

The report suggests that one reason older Black millennials are increasingly falling below wealth expectations is because of their staggering student-loan debt.

Black students shoulder a heavier debt burden than their white peers: About 87% of Black students attending four-year colleges take out student loans compared to about 60% of white students. They also owe $7,400 more on average than their white peers after graduating, per the Brookings Institute.

Black borrowers under the age of 40 were also more likely to be behind on payments in 2019 than white or Hispanic borrowers, according to the Federal Reserve. Black graduates are nearly five times as likely to default on their loans than their white peers.

The racial wealth gap is why some politicians and lawmakers are advocating for student-debt cancellation. Several experts previously told Insider that communities of color would be one of the groups that will gain the most from student-debt cancellation plans.

Right now, it looks like this socieconomic divide isn’t close to narrowing any time soon. As the St. Louis Fed report’s authors, Ana Hernández Kent and Lowell Ricketts, wrote, “Given the large wealth deficit and negative trend, the disparities among older Black millennials may persist as these families age, inhibiting their full participation in the economy.”

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Indian millennials are taking to the stock market, as the bored and young start driving markets worldwide

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Young investors in India are turning to the country’s stock market.

  • Millennials in India are driving the country’s stock market, Bloomberg reported.
  • They are likelier to take risks than their elders, departing from the asset investments typical in India.
  • Worldwide, young investors are shifting investing trends – and economies along with them.
  • See more stories on Insider’s business page.

Millennials in India might be changing the country’s stock market.

Driven by quarantine boredom, many 20- and 30-something Indians have turned to stock trading during the pandemic, reported Bloomberg. The stock market rally and rise of trading apps and social media has lured these young investors, Bloomberg wrote, many of whom are day trading for the first time.

The influx of young investors is a similar story around the world, but an especially positive sign for India’s economic development, as active investor accounts increased to a record 10.4 million in 2020. Only 3.7% of the country’s 1.36 billion people invest in equities, per Bloomberg, compared to 12.7% in China and 55% in the US.

“India could easily equal China’s market cap in the next five to 10 years because going forward, growth in India’s market will probably be faster,” emerging-market investor Mark Mobius told Bloomberg. “China, because of its size, will probably grow more slowly.”

It also signals that internet adoption is extending to areas of the country beyond the big cities of Mumbai and New Delhi. Securities firm Angel Broking told Bloomberg that more than 50% of its new customers in its fourth quarter were from “smaller cities and towns.”

Indian millennials are more likely to take market risks, a departure from other investors’ traditional investments in bank deposits and physical assets like real estate and gold, the latter of which served as an “insurance policy and a retirement plan in a country that lacks robust social welfare systems or widespread access to formal credit,” Bloomberg wrote.

This appetite for risk-taking is common in other markets’ experience of millennial investing, though, pointing to a more volatile economy as younger participants join the stock market.

Millennials are driving big investing trends

Worldwide, the bored and young fueled a big shift in investing in 2020.

Bitcoin was buzzing, surpassing its previous peak from December 2017, a year when it had a “wild run,” rising by more than 1,300% and going mainstream before tumbling the next year as it and other cryptocurrencies slumped.

But substantial millennial interest brought the hype alive again. The conditions of the pandemic and resulting search for an investing hedge against potential inflation, more widespread availability on PayPal and Square, and new Wall Street regulators, could be contributing to its rally.

Stock-trading startup Robinhood also saw explosive growth during the pandemic thanks to a new generation of novice traders flocking to the stock, options, and cryptocurrency platform, Insider’s Graham Rapier reported. The free-trading investing app, whose average user is 33 years old, added 3 million users to its current total of 13 million this year alone. The company even raised $200 million in funding in December.

But the boom hasn’t been entirely positive: It’s triggered outages and angry customers, and amateur traders have lost thousands of dollars through high-volume day trades.

More recently, a group of day-trading Redditors from The WallStreetBets forum used the platform to incite frenzied trading in the shares of GameStop in response to hedge funds “shorting” the stock. Their trades sent GameStop soaring, causing an estimated $19 billion of losses for short sellers in the company as of January 29.

As the young come into both money and access to day trading, their investment trends are ultimately shaping economies across the globe, from the US to India.

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Millennial New Yorkers are ditching basements and roommates for luxury apartments at $1,000-plus discounts

New York City skyline
Plunging rents have put luxury living within the budgets of young professional New Yorkers.

  • Millennial New Yorkers are piling into luxury apartments amid plunging rents and concessions.
  • They’re upgrading their living situation in pursuit of more amenities, space, and the solo life.
  • As of January, rents were down 15.5% in Manhattan and 8.6% in both Brooklyn and Queens, per StreetEasy
  • Visit the Business section of Insider for more stories.

$3,200. $3,000. $2,900.

Over the past several months, Brett Vergara had been watching rent fall like dominoes for apartments at The Brooklyner, a residential skyscraper that briefly had the title of Brooklyn’s tallest building around a decade ago.

Replete with a rooftop deck, floor-to-ceiling views of The Empire State Building, and an in-building fitness center, The Brooklyner was a far cry from the Park Slope basement he lived in when he first moved to New York, where bars blocked the view out of his lone window. 

“I was playing chicken with the fallen rent prices,” Vergara told Insider. 

Vergara, a 28-year-old who works as a UX program manager, said he shared his last Brooklyn apartment with three roommates, with his share of rent coming to $825 a month. He had been flirting with the idea of solo living for the past two years. 

“Part of me was torn between riding out really low rent for as long as I could and trying to figure out when was the right time to make the jump,” Vergara said.

The pandemic just so happened to be that time.

When a corner one-bedroom, which he said was priced around $4,000 when last listed in October 2019, hit $2,650 in February, Vergara said he decided to “strike while the iron was hot” and signed a lease for 66% off its pre-pandemic price.

In a city notorious for its unaffordability, the pandemic era has sent once sky-high rents plummeting, making luxury living by New York City standards attainable for those once priced out of such a lifestyle. Millennial New Yorkers like Vergara are jumping on deals they know won’t last indefinitely, upgrading to luxury apartments that suddenly fit with their budgets.     

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Brett Vergara scored a corner unit in a luxury apartment for over $1,000 below its pre-pandemic price.

Rents have plunged amid a surplus of supply

When the city that never sleeps finally got some shut-eye, many wrote off the slumber as a city dying and traded in fast-racing taxis and towering apartments for sedans and picket fences. But for some of the young urban professionals who stayed, it was the beginning of a whole new life.

“The pressures COVID placed on the marketplace created a unique opportunity to secure leases in prime locations and great buildings for significant discounts,” agent Ryan Kaplan, of Douglas Elliman, told Insider. New Yorkers fleeing for the suburbs sent rental vacancies climbing, prompting landlords to lower rents in an attempt to attract new residents and propel revenue.

Rents in Manhattan, Brooklyn and Queens all had the largest year-over-year declines on record, dropping a whopping 15.5% in Manhattan and 8.6% in both Brooklyn and Queens, per StreetEasy’s January Rental Report. The median asking rent in Manhattan was $2,750 – the lowest it’s been since March 2010, when rents dropped during The Great Recession. Insider’s Libertina Brandt reported that rents are likely to continue falling throughout 2021.

While “luxury” can mean many things to different people, StreetEasy defines it as the top 20% of the market. Luxury rental prices dropped the most in Manhattan, falling by 11.9% to $5,642 from the second quarter of 2019 to the fourth quarter of 2020, according to data StreetEasy provided Insider. Prices fell by 9.7% to $2,935 in Queens during the same period and 7.5% to $3,937 in Brooklyn.

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Units at Level BK range from $2,495 for a studio to $9,000 for a three-bedroom, per Street Easy.

In NYC, a golden standard of climbing up the apartment ladder is snagging an apartment in a doorman building. In January 2020, the average rent for Manhattan one-bedrooms in doorman buildings were $4,514, data from real estate agency MNS revealed. By January 2021, they had dropped to $3,718. 

Iliana Acevedo, senior vice president of new development at MNS, told Insider that they’ve been seeing millennials “not only upgrading to more amenitized buildings but also upgrading in unit size and neighborhoods that they were priced out of pre-COVID.”

Compass has done about 900 rental deals, the majority of which have been with millennials, since last March, Compass agent Ori Goldman told Insider. But he said he wouldn’t classify it as “millennials going luxury for the first time as much as just an extreme market drop, which means anyone who used to afford Manhattan can now afford the luxury.” 

A building with amenities provides a much-needed community

On top, or sometimes instead of, lower rents, many luxury buildings are offering concessions of two or three months free. 

Consider Vergara, who negotiated an 18-month lease with two-and-a-half months free, putting his net rent at $2,250 a month.

“Increased concessions and suppressed pricing allows somebody to rent out a nicer, more luxurious building, with more amenities and a better location,” said Joshua Young, vice president of market-rate operations at the Douglaston Companies. His firm owns luxury buildings The Ohm In Chelsea as well as Level BK and 1N4th on the Williamsburg waterfront, where rents range from $2,500 for a studio to $8,300 for a one-bedroom and amenities include an outdoor pool with skyline views of Manhattan.

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Vergara has a panoramic view from his Peloton.

Many of the experts Insider spoke with said the millennials who are upgrading covet amenities like an in-unit laundry, 24-hour doormen, pools, and gyms.  Air quality is also high on the list.

“The younger demographic is looking for service,” Young told Insider. “It’s really about the whole amenity package.”

That’s something millennials may have traded previously for location in a walk-up building, said Chris Schmidt, senior vice president of Related Companies, which owns luxurious rentals at buildings including The Strathmore on the Upper East Side, which has its own squash court, and One Hudson Yards, which features a penthouse longe and bowling alley. At the latter, one bedrooms can go for as much as $7,453 a month. In February, he said, Related’s rents were trending down about 15% to 25% depending on the unit type. 

Now, he said, a building filled with amenities provides a sense of community millennials feel has been missing in New York’s partially shut-down neighborhoods.

It’s what lured Vergara to The Brooklyner, but he said he hasn’t yet taken full advantage of the amenities because he’s staying cautious indoors, even with masked strangers, until he’s vaccinated. “It’s funny because those things aren’t even really revealing their hands yet,” he said.

Space: the most important amenity in a WFH economy

Both Kaplan and Schmidt said the search for an upgrade has seduced some millennial Brooklynites back to Manhattan, where they’re now finding the space and affordability they once left the island in pursuit of. Schmidt noted that Related’s buildings in Chelsea and Hudson Yards have been the most popular.

But Brooklyn isn’t losing its luster. Young said he’s seeing the trend the most in Douglaston’s two Williamsburg buildings, where there’s a feeling of more space by the water and nearby parks.

Juliana Goldman_Olivia Kenney
Juliana Goldman upgraded from a Manhattan studio to a Brooklyn one-bedroom.

Last June, Juliana Goldman decided to prioritize her living space. She was living in a large railroad-style studio in lower Manhattan “with zero light and super thin walls,” she told Insider. It was time to hightail it to Brooklyn, where she always envisioned herself for its community feel.

Her non-negotiables: an in-unit washer dryer and floor-to-ceiling windows with lots of natural light. “I’m a plant parent,” the 34-year-old founder of lifestyle and beauty public relations agency TGN explained.

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Goldman wanted more space and light.

She found it all at Level BK, Douglaston’s 41-story glass tower that shimmers over Williamsburg and the East River, complete with an outdoor space, steam room, and direct ferry service to Manhattan. At the time, apartment deals were just starting to come in, she said. While she declined to share monthly rent, she said she signed a two-year-lease with two months free. 

Trading up to a larger one-bedroom and brighter space was a game-changer, Goldman said: “It’s really helped having extra space and being able to create that working from home environment where it doesn’t feel like I’m literally working out of my bedroom.”

Space has always been a rare commodity in NYC, but the work-from-home economy has cast it in a whole new light. 

Many millennials like Goldman have been seeking an office space or a large living room that can accommodate a work zone, broker Isaiah Dunn of Compass told Insider. Common outdoor space, like a sun deck, also tops the list.

“People want to be able to have friends over when they want and not feel confined when at home all hours of the day, compared to pre-COVID, when you could just meet friends at a local spot,” he added.

Goldman said her space has become an oasis, as she spends her downtime vintage furniture shopping and decorating. “The energy here is better,” she said. “I just wake up exponentially happier every day because of my living environment.”

Entry into adulthood

Some millennials are opting for two-bedrooms with a roommate to further cut the cost of luxury, and some millennial couples are upgrading from a one-bedroom to a two-bedroom for an office space.

But three experts noted a big push toward entry-level studios and one-bedrooms. Schmidt of Related said most millennials upgrading, like Vergara, are doing so to have their own apartment for the first time.

Take Lauren Mennen, a 31-year-old news writer, who was living on the Upper West Side with three roommates before the pandemic. “I’ve never actually lived alone,” she told Insider. “I took the dropping rent prices as an opportunity to start looking.”

In October, she found the studio of her “dreams” in a luxury doorman building in the Financial District with an “amazing view” of 1 World Trade Center, the Empire State Building, and the Hudson River. The building itself has a gym and a sun deck.

Lauren Mennen roof deck
Lauren Mennen found a luxury apartment in Manhattan’s Financial District with a roof deck.

She was previously paying $1,500 a month for a four-bedroom flex unit (meaning the unit was originally two bedrooms with walls added later on to create four). Now she’s paying $1,700 – a big drop from the typical $2,800 monthly rent the place normally goes for. 

Even millennials already living by themselves are getting upgrades. For some, it’s the first time they’ve had a wall between their bed and their couch.

Both Goldman and Ai Nguyen, a 30-year-old behavioral specialist, fall into that category. In February, Nguyen moved from a 300-square-foot studio on the north side of the Upper West Side to a 500-square-foot one-bedroom farther south in the neighborhood in a newly renovated 14-story doorman building called the Parc Coliseum.

It was the new hardwood floors, in-unit laundry, and price that sealed the deal for her.

She told Insider her rent increased from $1,730 to $2,043 for the bigger place, but she scored a deal with two months free. That puts her net rent at $1,700 – less than her studio. A StreetEasy listing of a one-bedroom of similar size in the same building came to $3,704 in September 2019.

A rebounding market

Developers and real estate agents alike agreed that winter, typically slow in NYC real estate, has been millennial primetime.

“We’ve seen a particular spike in absorption since Thanksgiving, and millennials are a large percentage of renters rushing back to the city looking to snag a good deal before the spring rush,” MNS’ Acevedo said.

But just how long millennials will be able to cash in on an upgraded NYC lifestyle remains to be seen. 

Schmidt said it’ll be contingent upon when the city fully reopens, and he anticipates more real-estate momentum as vaccinations continue. “That’s going to force a lot of people seeing these steeper discounts to make a quicker decision,” he said, adding that as soon as there’s a better indication of when the workforce will return to offices, rents will start to go back up to pre-pandemic levels.

Ai Ngyuen
Ai Nguyen now has enough space for her own dance and workout studio in her Upper West Side one-bedroom, which costs less than her old studio.

NYC is the only major US city that still saw price drops in the last month, according to Apartment List. But it’s slowing down – rent only declined 0.1% compared to the average 2.4% over the last nine months.

Young said he’s already seeing strength in the market, and has begun pulling back on offering “month-free” discounts last week. There’s also the cyclical nature of leases, he explained: Since many jumped on deals in the middle of winter, fewer people will be vacating at the end of March. Less supply gives buildings an opportunity to pull back on prices and incentives.

Some of those who nabbed a deal at what appears to be the bottom of the market said they’re also concerned about what their rent will look like after their lease is up. Nguyen, the Upper West Sider, said she’d likely stay if it only goes up by $200 a month. Any more than that, she said, and she’d be okay with leaving the city. 

Regardless, they all said they feel extremely lucky to have been able to move during the pandemic. “There’s a sense of guilty gratitude,” Vergara said. “I feel like I got away with something.” 

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One silver lining of the pandemic: Millennials are saving more

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The pandemic has helped some millennials boost their retirement savings.

Millennials are finally saving.

It seems the pandemic has helped some millennials sock away some money for retirement. Wells Fargo’s 2020 Annual Retirement Study, which surveyed 4,500-plus Americans ages 18 to 76, found that the pandemic left boomers and retirees more financially exposed and millennials saving more.

In fact, 18% of millennials have increased their retirement savings since the pandemic began, according to the study. It also revealed that 29% of millennials began saving for retirement at a younger age (25) than Gen X and boomers did, at ages 30 and 36, respectively. 

But that’s not the case for all millennials – 39% of millennial workers said in the survey they don’t know if they can save enough money for retirement because of the pandemic’s economic impact.

The generation has been notorious for its lack of wealth, blamed primarily on the Great Recession and its aftermath, the US’ crippling $1.6 trillion student debt burden, and a skyrocketing cost of living.

Such financial roadblocks have all made it difficult for some millennials to save. “Older millennials are often realizing they’re going to have to play catch-up with their finances if they want to ever be able to retire, but some of them have already decided that they likely will not ever be able to afford to retire,” Jason Dorsey, a consultant, researcher of millennials, and president of the Center for Generational Kinetics, previously told Business Insider.

It’s likely those who have been able to boost their retirement savings weren’t part of the millennial cohort who received pay cuts or found themselves unemployed during the pandemic. But it’s not just millennials – saving is up across the board as the US household net worth hit a record in the third quarter, up 3.2% from the second quarter. With many businesses shut down when the pandemic first hit the US in the spring, people began spending less, leaving more money to save. Having federal student loan payments paused until December 31 also likely made it easier for younger generations to stash money away.

But saving for retirement isn’t the only way the pandemic has helped some millennials financially prepare for their future. A 2020 Northwestern Mutual study that polled 2,700 Americans found that slightly over a quarter of millennials are readjusting their financial plans, more than any other generation, and that one-fifth of millennials are now creating a financial plan.

And when asked what age respondents expected to retire, millennials cited the earliest target date of all generations: 61. 

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