Meet the typical 40-year-old millennial, who has $128,000 in debt, is not nearly as wealthy as their parents were, and is known as ‘geriatric’

millennial
The oldest millennials turn 40 this year.

The oldest millennials enter middle age this year.

The generation turns ages 25 to 40 in 2021, per the Pew Research Center’s definition. Like everyone, millennials are aging. But it’s a hard concept to grasp when the media narrative has painted millennials as young, frivolous 20-somethings who love selfies and can’t afford anything because they spend too much money on avocado toast.

It’s an inaccurate picture of the entire generation, which has been shaped by technological advancements and a broken economy. But the typical 40-year-old millennial especially doesn’t quite align with this image. Many feel they embody some characteristics of both Gen X and millennials, having experience with both analog and digital worlds.

Millennials are known for battling a series of economic challenges, from student debt to the Great Recession. The typical 40-year-old millennial bore the brunt of the financial crisis, leaving them with less wealth and more debt than past generations at their age. But, compared to their younger generational peers, they have less student debt and are more likely to own homes and have kids – a sign that many have been able to recover from the financial fallout.

Here’s what life looks like for the typical 40-year-old millennial.

The typical 40-year-old millennial was one of those hardest hit by the Great Recession.

40 year old millennial

When the 2007 financial crisis began, the 40-year-old millennial was 26, an age at which most of the generation hadn’t yet accumulated substantial wealth. It’s this cohort that bore the true brunt of the financial crisis,which left lingering effects a dozen years later when the coronavirus recession rolled around.

From the very beginning of their careers, they entered a dismal labor market that set them up for a long recovery.

“Millennials have lifelong damage, given the severity of the Great Recession,” Mark Muro, a senior fellow and policy director at the Brookings Institution, previously told Insider, adding that “older millennials were squarely hammered.”

 

Their early post-graduate years were marked by a tough job market that led to wage stagnation. The typical 40-year-old millennial earns $73,000 a year.

office worker

Boomers earned around $72,000 at that age, while Gen X earned around $68,000, according to a Bloomberg analysis of Federal Reserve data. That is all to say: wages have remained stagnant since 1989.

Wages haven’t kept up with soaring living costs for everything from healthcare to housing, creating a financial imbalance that’s been difficult for the 40-year-old millennial to rectify.

 

It’s made building wealth difficult. With a net worth of $91,000, the typical 40-year-old millennial is only 80% as wealthy as their parents were at their age.

Stressed woman

At age 40, Gen X was worth $94,000. Boomers held $112,000 in wealth at that age, per Bloomberg.

But the oldest millennials are catching up. A 2018 St. Louis Fed study originally found that those born in the 1980s have median levels 34% below older generations, causing the Fed to deem them at risk of becoming a “lost generation” for wealth accumulation.

“Not only is their wealth shortfall in 2016 very large in percentage terms, but the typical 1980s family actually lost ground in relative terms between 2010 and 2016, a period of rapidly rising asset values that buoyed the wealth of all older cohorts,” the 2018 report read.

A follow-up study in 2021 found 1980s millennials gained some ground, narrowing their wealth deficit to 11%. “It turns out that millennials may not be as ‘lost’ as we once thought,” according to the report. 

 

 

They also have $128,000 in debt. While some of this may be from student loans, they don’t carry the weight of student debt as much as younger millennials

Student loan debt

This debt is way more than what Gen X and boomers had at age 40 — $94,000 and $112,000, respectively, per Bloomberg.

One might first look to student loans as the source of this debt. College tuition has more than doubled since the 1980s, and student-loan debt reached a national high of $1.5 trillion in 2019. Many millennials are shouldering their share of this burden.

The typical 40-year-old millennial entered college in 1999, and graduated in 2003 (under a typical four-year plan). According to an analysis by the research team at Education Data, 73% of students graduating that year took out a student loan. That year, the average debt at graduation per student was $16,070, equivalent to $22,170 today.

But that’s not as much as the typical youngest millennial, who turns 25 this year. They graduated with about $29,500 in student debt.

 

It’s likely a good chunk of that debt comes from a mortgage. The typical 40-year-old millennial owns a home.

house

According to an Insider analysis of 2019 American Community Survey microdata from the University of Minnesota’s IPUMS program, 61.9% of 40-year-old millennials (who were 38 when the survey was taken) own a home.

However, that’s still lower than previous generations at that age: 68% of Gen X and 66% for boomers. As housing prices climbed over the years, millennials began renting longer and buying later. While some have finally been able to afford a house amid low interest rates during pandemic, the demand has exacerbated a historic housing shortage that has pushed homeonwership further out of reach for other millennials.

The homeowning life stage means that most 40-year-old millennials have a mortgage. It aligns with previous findings from an Insider and Morning Consult survey, which found that’s it not just student-loan debt millennials are swimming in. A mortgage is typically their biggest debt, according to the survey. 

 

They also have kids. Achieving these standard life milestones is a sign that many have caught up from the delayed effects of the Great Recession.

mother baby

“The oldest millennials delayed many of the traditional markers of adulthood, such as marriage, kids, and buying homes, as they went through the eye of the Great Recession and the long and uneven recovery afterward,” Jason Dorsey, a consultant and president of the Center for Generational Kinetics, previously told Insider

As millennials delay marriage and homeownership, they’ve delayed childbearing until they they felt more financially sound. More women are having kids at a later age than ever.

But as of 2019, 66% of 40-year-old millennials (who were 38 at the time), have kids, according Insider’s analysis of 2019 American Community Survey microdata from the University of Minnesota’s IPUMS program.

But the typical 40-year-old millennial dissociates from their generation. Caught between Gen X and millennials, they almost feel generationless.

older millennial

As Alisha Tillery wrote for Shondaland, being the oldest millennial “is to be an outlier of sorts, to really have no generation to identify with at all, yet be perfectly okay with not fitting into one box or the other.”

“We are caught in a tight space that remembers the days of old (before Google, Facebook, and YouTube), but is also intrigued by the future and a new way of doing things,” she added.

Jessica Guinn Johnson, an attorney in Baton Rouge, Louisiana, born in 1981, told Tillery, “I never found that I fit in the millennial mold, but identified more with Gen X.”

Robert L. Reece, a University of Texas-Austin sociology professor, told Tillery there’s validity in classifying oneself as a millennial but not identifying with the typical characteristics of the generation.

It explains why the 40-year-old millennial is largely seen as being part of a microgeneration, for which there have been many names.

geriatric millennial

As Tillery wrote, some millennials feel they better identify with the cusper (someone who straddles two generations) term Xennial. It describes a micro-generation “that serves as a bridge between the disaffection of Gen X and the blithe optimism of millennials,” Sarah Stankorb wrote for Good Magazine in 2014.

In a Medium article that went viral in the spring, author and leadership expert Erica Dhawan called the micro-generation that the 40-year-old millennial falls into “geriatric millennials,” which she defines as those born between 1980 and 1985. What sets them apart, she recently told Insider, is their experience with technology.

 

The typical 40-year-old millennial remembers PCs, the days of early dial-up, and MySpace, but also feels comfortable on TikTok and Clubhouse.

clubhouse app

Whereas younger millennials don’t know a world without digital tools as a primary form of communication, the eldest millennials remember when they were very primitive.

“They were the first generation to grow up with a PC in their homes. They joined the first social media communities on Facebook and MySpace. They remember dial-up connections, collect calls, and punch cards,” Dhawan previously told Insider, adding they also remember things like Napster for burning CDs, as well as the regular flip phone. 

But while they’re fluent in the early days of the internet and digital technology, they’ve also been able to easily adapt to newer forms of digital media, like TikTok, which may be unfamiliar to older generations like baby boomers and commonplace among younger generations like Gen Z.

“This is a unique cohort that straddles digital natives and digital adapters,” Dhawan said.

 

But straddling a digital divide means the typical 40-year-old millennial is an asset in the workforce.

business meeting

With the skills of both older and younger generations, Dhawan said, they can bridge communication styles in the workplace.

For example, she said, a geriatric millennial would know to send a Slack message to a Gen Z co-worker instead of calling them out of the blue, which they might find alarming. But they would also know to be mindful of an older co-worker’s video background and help walk them through such technology.

“They can help straddle the divide,” she said. “They can teach traditional communication skills to some of those younger employees and digital body language to older team members.”

Read the original article on Business Insider

Millennials are still driving a ‘roaring ’20s’ of homeownership demand, but there aren’t enough houses for them

suburbs houses
There are too many potential millennial homebuyers, and not enough homes.

A record number of millennials wanted to buy homes in 2020, but the real estate market can’t keep up.

So finds financial services company First American, which measures potential homeownership demand based on lifestyle, societal, and economic factors in what it calls its Homeownership Progress Index (HPRI). When potential homeownership demand exceeds the actual homeownership rate, it signifies that external forces are suppressing housebuying.

Its new report reveals that potential homeownership demand has surpassed the homeownership rate since 2010, following the aftermath of the Great Recession. But the difference between the two hit an all-time high during the pandemic. Demand rose from 68.8% the year prior to 70.21% in 2020, while the national homeownership rate grew from 64.7% to 66.7%.

Contrary to the popular narrative that millennials can’t afford to a buy a house because they spend too much money on avocado toast, there are more millennials trying to become homeowners than there are houses available.

Housing was largely an out-of-reach dream for millennials for years. Even before the pandemic, they were struggling to save for a down payment as they grappled with the fallout of the financial crisis and the burden of student debt.

But as the generation became more financially stable with age, its potential homeownership demand has increased by 3.5 percentage points year-over-year, per First American. That’s more than any other generation. The majority of millennials turned 30 in 2020 and the oldest turn 40 this year, signifying they’ve reached the peak age for first-time homeownership.

Read more: Millennials are getting screwed again by their 2nd housing crisis in 12 years

Not enough houses for homebuying millennials

America has been running out of houses amid a historic housing shortage. A lumber scarcity and the pandemic itself have only exacerbated the shrinking inventory, as has the wave of homebuying demand during a remote work era.

“We’ve been underbuilding for years,” Gay Cororaton, the director of housing and commercial research for the National Association of Realtors (NAR), told Insider at the end of April. She said the US had been about 6.5 million homes short since 2000, then facing a two-month supply of homes that should look more like a six-month supply. Because of this, she added, homeownership is “going to be more difficult for millennials.”

Daryl Fairweather, the chief economist at Redfin, added that there have been 20 times fewer homes built in the past decade than in any decade as far back as the 1960s. She said it’s not enough homes for millennials, who are the biggest generation, to buy.

The imbalance has propelled housing costs to several record highs, resulting in bidding wars nearly everywhere nationwide, with competing bidders throwing down all-cash bids and higher down payments. It’s become millennials’ second housing crisis during their adulthoods.

Skyrocketing prices have pushed homeownership out of reach for many millennials, despite some of their peers leading the housing recovery. While the wealthier cohort of the millennials may be better positioned to buy a home, even those who successfully managed to scrape together some savings are facing dwindling chances of homeownership.

But millennials will be driving the housing market for years to come. As Odeta Kushi, deputy chief economist at First American, wrote in the report, “While millennial homeownership has been delayed relative to their generational predecessors, millennials now have the greatest influence on the housing market and remain poised to fuel a ‘roaring 20s’ of homeownership demand.”

Read the original article on Business Insider

The ‘Great American Land Rush’ is wiping out the starter home

starter house
Millennials can barely get their hands on a starter house.

  • The number of starter homes on the market sits at a 50-year low, per Freddie Mac data.
  • It’s not good news for millennials, many of whom are first-time homebuyers fueling a housing boom.
  • A housing expert recently told the WSJ that it’s creating a “Great American Land Rush.”
  • See more stories on Insider’s business page.

Starter homes are running dry, and it’s a big pain for those who need them most – millennials.

The generation, which turns ages 25 to 40 this year, has reached peak age for first-time homeownership. More millennials became homeowners than any other generation in 2020, driving a yearlong housing boom.

But this increased demand from millennials in an era of remote work, coupled with a lumber shortage and the fact that contractors have been underbuilding over the past dozen years, has exacerbated a shrinking housing inventory, with record-high prices for remaining houses.

As bidding wars rife with all-cash offers and higher down payments heat up the market, many millennials face the second housing crisis of their adulthoods.

There have been 20 times fewer homes built in the past decade than in any decade as far back as the 1960s, Daryl Fairweather, chief economist at Redfin, previously told Insider. Data from Freddie Mac shows that the housing shortfall has led to a decline in entry-level homes – the ones most affordable for millennials.

Freddie Mac defines an entry-level home as one under 1,400 square feet. Its data reveals that the current supply sits at a 50-year low. In the late 1970s, about 418,000 entry-level homes were built on average per year. In 2020, only 65,000 entry-level homes were built, even though 2.38 million first-time homebuyers purchased a home that year.

“There just aren’t enough of these homes to fulfill the demand,” Ed Pinto, director of the American Enterprise Institute, recently told The Wall Street Journal. “It’s creating this ‘Great American Land Rush,’ as I call it. People are moving around and there’s tremendous demand, but the inventory is down.”

The fall of the starter home

Housing was largely an out-of-reach dream for millennials for years. Even before the pandemic, they were struggling to take advantage of historically low mortgage rates as soaring living costs, student debt, and the fallout of the Great Recession made saving up for a down payment difficult.

They were already contending with a dwindling starter home supply back then.

In 2018, starter homes represented just 20.9% of available housing inventory in the US, according to Trulia. And a Realtor.com report at the end of 2019 predicted that while low interest rates would make it easier for millennials to buy, a shortage of entry-level homes would prove to be a major obstacle, largely because newbuilds that year were mostly devoted to “upper-tier housing” that cost at least $500,000.

Real-estate investors were only making the problem worse. In 2018, they bought roughly 20% of US starter homes – twice as many as they did 20 years ago, The New York Times reported, citing real-estate data provider CoreLogic.

Now, the pandemic and its consequent recession have added fuel to the fire just as millennials were finally recovering from their accumulated economic woes. “Now that they have economically recovered and are looking to buy a home for the first time, we’re faced with this housing shortage,” Fairweather told Insider. “They’re already boxed out of the housing market.”

Are you a millennial feeling shut out of the housing market? Email this reporter at hhoffower@insider.com.

Read the original article on Business Insider

70% of millennials are living paycheck to paycheck, more than any other generation

millennial
Millennials paychecks’ are wearing thin.

Millennials’ wallets are rather skimpy.

Seventy percent of the generation said they’re living paycheck to paycheck, according to a new survey by PYMNTS and LendingClub, which analyzed economic data and census-balanced surveys of over 28,000 Americans. It found that about 54% of Americans live paycheck to paycheck, but millennials had the biggest broke energy.

By contrast, 40% of baby boomers and seniors said they live paycheck to paycheck, the least of any generation. Living paycheck to paycheck reflects economic needs and wants just as much, if not more than, incomes or wealth levels, according to the report. Age and family status also factor in greatly. This explains why millennials, who turn ages 25 to 40 this year, are struggling.

“Millennials – especially older ones – are collectively at important stages of their lives,” the report reads. “They may be starting families or taking on their first major purchases, such as homes and new vehicles, but they may also be less advanced in their careers than their older counterparts.”

It doesn’t help that millennials have faced one economic challenge after another since the oldest of them graduated into the dismal job market of the 2008 financial crisis. A dozen years later, many are still grappling with the lingering effects of The Great Recession, struggling to build wealth while trying to afford soaring costs for things like housing and healthcare and shouldering the lion’s share of America’s student-loan debt.

The pandemic threw yet another wrench into their plans by giving them their second recession and second housing crisis before the age of 40. The report acknowledges that the pandemic played a major role in that stretched thin feeling.

“Living paycheck to paycheck sometimes carries connotations of barely scraping by and of poverty,” it states. “The reality of a paycheck-to-paycheck lifestyle in the United States today is much more complex, and the current economic environment has made it even more complicated.”

It’s left even six-figure earning millennials struggling to get by. The survey found that 60% of millennials raking in over $100,000 a year said they’re living paycheck to paycheck.

Of course, the economy isn’t fully to blame. Some millennials, particularly the six-figure earners, are known to fall victim to lifestyle creep, when one increases one’s standard of living to match a rise in discretionary income. This makes it more difficult to balance spending and savings habits.

But the report found that those who felt they were living paycheck to paycheck were mostly financially responsible. If they received additional sources of income during the year, many tucked it away rather than spent it.

It seems, then, that it’s a combination of external economic circumstances, a precarious life stage, and some spending habits that are leaving millennials feeling strapped for cash.

Read the original article on Business Insider

60% of millennials earning over $100,000 say they’re living paycheck to paycheck

wealthy millennial
High-earning millennials are stretching their paychecks.

High-earning millennials are feeling broke.

Sixty percent of millennials raking in over $100,000 a year say they’re living paycheck to paycheck, according to a new survey by PYMNTS and lending company LendingClub which analyzed economic data and census-balanced surveys of over 28,000 Americans.

It found that the more than half (54%) Americans are living paycheck to paycheck. And nearly 40% of high-earners – those making more than $100,000 annually – say they live that way.

That means high-earning millennials aren’t the only ones feeling stretched thin, but they feel that way more than their six-figure making peers. Living on constrained budgets may therefore have less to do with income and more to do with expenses, the report says.

That’s partly due to lifestyle choices. Many of these millennials are likely HENRYs – short for high earner, not rich yet. The acronym that was invented back in 2003, but has come to characterize a certain group of 30-something six-figure earners who struggle to balance their spending and savings habits.

HENRYs typically fall victim to lifestyle creep, when one increases their standard of living to match a rise in discretionary income. They prefer a comfortable and often expensive lifestyle that leaves them living paycheck to paycheck.

Read more: Here’s why so many millennials making 6-figure salaries still feel broke

A $100,000 salary isn’t what it was

The economy is also a huge factor behind six-figure-earning millennials feel so broke.

As the report reads, “Living paycheck to paycheck sometimes carries connotations of barely scraping by and of poverty. The reality of a paycheck-to-paycheck lifestyle in the United States today is much more complex, and the current economic environment has made it even more complicated.”

It cited the example of a college-educated 35-year-old earning more than $100,000 while juggling a mortgage, student-loan debt, and a child, which could leave them with little savings for big purchases or unexpected emergencies.

The generation is facing an affordability crisis. Income increases simply have not kept up with an exponential increase in living costs, and the pandemic hasn’t helped matters by throwing job loss and pay cuts into the mix.

The cost of education has also more than doubled since the 1970s, leaving many millennials racked with student debt. Priya Malani, the founder of Stash Wealth, a financial firm that works with HENRYs, previously told Insider that 40% of her clients had student loans – they owe $80,000 on average.

As a byproduct of this increased cost in living, the middle class has been shrinking. Pew Research Center defines the US middle class as people earning two-thirds to twice the median household income, earning about $48,500 to $145,500 in 2018, per most recent data available.

That means a six-figure salary is no longer what it used to be. In today’s economy, $100,000 is considered middle class in the US.

Read the original article on Business Insider

Millennials are about to get screwed yet again if Biden doesn’t cancel student-loan debt

student debt millennials
If Biden doesn’t cancel student debt, millennials are in store for another economic challenge.

Millions of Americans have enjoyed a reprieve from the squeeze of student debt during the pandemic. But, come fall, the student-debt crisis could pick up where it left off – or snowball into an even bigger problem.

The pause on student-loan payments and zero interest accrual that have been in place since March 2020 will lift at the end of September. When it does, borrowers will be paying 1% more in interest than they did in 2019. Although rates are still relatively low compared to previous years, Forbes reported that the new interest rates will cost borrowers as much as an additional $590 per $10,000 borrowed on a 10-year repayment term.

The impending lift on the payment pause, coupled with rising interest rates, doesn’t bode well for millions of borrowers, who have been able to stay financially afloat during the pandemic without the burden of paying off their student-loan debt. That’s especially true for millennials, for which student-loan debt has been one of many balls in a long-time juggling act of financial challenges.

Many have been hoping they wouldn’t have any student-loan debt at all come fall – or at least, a much lighter load.

Joe Biden campaigned on supporting $10,000 in student debt cancelation per person, but since becoming president, he’s given no clear timeline for doing so. He hasn’t included his campaign promise in his stimulus plan, infrastructure plan, or his budget, and has resisted calls from Democratic lawmakers to cancel up to $50,000 per person using his executive powers. While he released a regulatory agenda on Friday that plans to improve student-loan forgiveness programs by 2022, it’s not the immediate relief Democrats are looking for, and its details are vague.

Millennials have had bad economic luck. They’ve ventured through one financial woe after another since the oldest of them graduated into the dismal job market of the 2008 financial crisis. A dozen years later, many are still grappling with the lingering effects of The Great Recession, struggling to build wealth while trying to afford soaring living costs for things like housing and healthcare. The pandemic threw yet another wrench into their plans by giving them their second recession and second housing crisis before the age of 40.

And the generation has dealt with all of this while shouldering the lion’s share of student-loan debt. If Biden continues not to act on debt relief, the student-loan crisis has the potential to intensify, adding to the pile of millennial economic challenges.

Student debt has left a stain on millennials’ adulthood

Forty-three million borrowers currently share the $1.7 trillion of national student-loan debt. As of 2019, the 15.1 million borrowers ages 25 to 34 – a large chunk of the millennial population – owed an average of $33,000.

The burden is so great that it’s prevented many millennials from achieving life milestones like buying a house, having kids, or moving to their dream city.

“I still haven’t been able to save enough to put a down payment on a house and commit to another 30-year loan,” Daniela Capparelli, who graduated with $150,000 debt, told Insider in the beginning of 2020, when she was 35. “I often feel like I already have a mortgage without the house.”

student graduate
Student debt has been one of millennials’ many economic woes.

Read more: Millennials are finally catching up in earnings and homeownership, but student debt is keeping the generational wealth gap as vast as ever

Student loans are also keeping the generational wealth gap as vast as ever. If student loans didn’t exist, millennials ages 28 to 38 would have a 76% net wealth-to-income ratio, higher than their current 56% wealth-to-income ratio, per a report by the Center for Retirement Research at Boston College.

For the millennials who have found themselves at the bottom of the intragenerational millennial wealth gap that the pandemic has exacerbated, student debt is especially painful. This group was more likely to already have lower earnings pre-pandemic, and to burn through savings when hit by unemployment or pay cuts.

The pause in payments has been a temporary solution to the nation’s debt burden. Borrowers have saved $2,000 on average in interest during this time, per a report by travel research group Upgraded Points which also noted, “while those couple thousand dollars could have been imperative in keeping borrowers in the black during pandemic-related hardships, these borrowers are still far from climbing out of the holes they dug in college.”

When the pause lifts, it has the potential to leave struggling millennials feeling more slammed with student debt than before, after a year spent falling further financially behind on other areas.

Biden has canceled billions of student loans that are only 0.2% of the total

Now, Biden has taken some steps toward student-loan debt assistance. He extended the payment pause, which was set to end in January, through September 30. And, through the Department of Education, he cleared up billions of dollars in debt in just a few months for borrowers defrauded by for-profit schools and borrowers with disabilities.

But, as Insider’s Ayelet Sheffey reported, this still left trillions of outstanding debt. Alan Collinge, the founder of Student Loan Justice, told her that compared with the scale of the student-debt crisis, canceling debt for defrauded borrowers and borrowers with disabilities is “massively unimpressive.”

“We’re in a pandemic, and we’ve lost tens of millions of jobs,” he said. “The people who are hurt the worst tend to be the people who have student-loan debt.”

student loan debt college
Millions of borrowers are waiting for Biden to fulfill his campaign promise of cancelling $10,000 in student debt per borrower.

Read more: The case for cancelling student debt isn’t political – it’s practical. Here are the benefits of erasing $1.6 trillion, no strings attached.

So far, $2.3 billion in student debt has been cancelled – only 0.2% of student loans swimming through the system.

In February, he effectively rejected a plan put forward by Sens. Elizabeth Warren and Chuck Schumer to wipe out $50,000 in student-loan debt per borrower.

“I will not make that happen,” he had said to a CNN town-hall audience, adding that he believed loan forgiveness depends on whether borrowers attended a private or public college. “I’m prepared to write off $10,000 in debt, but not 50. I don’t think I have the authority to do it.”

Both Democrats and cities have urged Biden to cancel $50,000 in student debt per borrower, arguing that it would provide immediate relief to borrowers if Biden used his executive authority to do so. But there’s a discrepancy among Biden and lawmakers on whether he can actually use his executive powers to cancel debt.

He told The Washington Post that it is “arguable” the president can use executive powers to cancel student debt, and he would be unlikely to do so. That means the status of the cancelation of a minimum of $10,000 of debt remains in Congress’ hands.

Student-loan forgiveness would be a ‘lifeline’ for millennials

Student-loan relief would benefit millions.

A Department of Education (DOE) analysis obtained by Yahoo Finance found that $50,000 in student-loan forgiveness per person would erase the entire debt for 84% of borrowers in the US with federal loans, while $10,000 in forgiveness would erase the entire debt for 35% of these borrowers.

That includes everyone from Gen Z to those over the age of 50. But millennials, facing one economic conundrum after another, have adopted new social norms to suit the times, hitting milestones like marriage and homeownership later than their parents, if they happen at all. The pandemic has created a whole new slew of crises for them that have exacerbated existing ones, student debt chief among them.

student debt
Student-debt forgiveness would help narrow the generational wealth gap.

Read more: College is more expensive than it’s ever been, and the 5 reasons why suggest it’s only going to get worse

Student-loan forgiveness was a top priority for voters in the election. If Biden doesn’t fulfill his campaign promise to relieve $10,000 in student debt, he’d be leaving the generation, many of whom were banking on him to absolve at least a portion of their biggest burdens, screwed yet again.

“We need some help, and that forgiveness, for a lot of us, would just be a lifeline,” Alexander Cockerham, 38, who took out $42,000 in federal in private loans to attend school, previously told Insider.

But the resumption of student loan payments is drawing near, with little to no action in sight. In early April, Biden’s chief of staff, Ron Klain, told Politico that the White House was “looking into” its legal authority to cancel $50,000 per person. Shortly afterward, the White House press secretary, Jen Psaki, said that option wasn’t being ruled out.

An Education Dept. spokesperson told Insider that the agency remains “committed to delivering” targeted relief to borrowers and helping all of them manage repayment, and continues to closely review data related to return to repayment. It is also working with the Department of Justice and White House “as quickly as possible” to review all student debt cancellation options. (The White House did not respond to a request for comment).

While cancellation doesn’t exactly need to happen before the pause lifts, it would be even more beneficial to borrowers if it did, helping them lower the amount they would pay interest on or even preventing them from ever having to pay again altogether. Education Secretary Miguel Cardona said in May he has not ruled out further extending the pause, but, again, no action has been taken yet to do so.

If Biden fails to cancel student debt, he’s sacrificing opportunities to help narrow the racial wealth gap, assist low-income borrowers, and boost the economy. For millennials, specifically, it would just be the latest way they can’t catch a break.

Read the original article on Business Insider

Most millennial homeowners regret buying their home, survey finds

millennial moving
Millennial homeowners are regretting buying a house.

Millennial homeowners are having buyer’s remorse.

Nearly two-thirds (64%) of millennials regret buying their home, a new Bankrate survey that polled 1,400-plus homeowners found. Just over 20% cited expensive maintenance costs as the reason why, while 13% said it’s because they overpaid.

Those reasons come as no surprise in today’s cutthroat housing market, marked by both a historic housing shortage and lumber shortage that have propelled housing costs to an all-time high. It’s resulted in heated bidding wars, where competing buyers are throwing down all-cash offers and offering higher down payments.

The skyrocketing prices and tight inventory is creating new affordability challenges for millennials, who have reached peak age for first-time homeownership. They led the housing market last year, but as the boom turned into an inventory crisis, homeownership fell out of reach for the generation yet again.

Many of those able to snag a house only did so by paying above market price, and some rushed the process in hopes of grabbing something before someone else did.

Consider Stella Guan, who told Insider’s Taylor Borden back in February that she regretted buying a home during the pandemic. Guan, who moved from New Jersey to Los Angeles, said she “wanted to get things done fast” and made seven or eight offers before one was finally accepted. Guan thought she landed her dream ranch-style home, saying she thought she got lucky since there was “somehow no counteroffer.”

But the home had black mold, and repairs cost way more than planned. She budgeted $30,000 to fix up the property but ended up paying upward of $50,000 to overhaul the house. While Guan planned to update the home to her tastes, she said: “I spent all my money on repair and not renovation.”

Unable to lure a new buyer, so she sold to an iBuyer and recouped only 50% of her money. She said the state of the housing market can push people into regrettable decisions.

Homeownership isn’t always as it seems

Guan isn’t the only one who found home improvement costly, per findings from BofA Research’s sixth annual millennial home improvement survey.

It found that millennials are more likely to buy a fixer-upper than a new home, and that some are using loans more frequently than cash to fund home improvement projects exceeding $10,000. When BofA last conducted the survey in 2017, only 34% were using loans for home improvement. Today, 42% of respondents are.

The data suggests that some millennials are resorting to buying old homes and renovating them as an alternative to attempting to outbid an all-cash offer, but that some are now living in fixer uppers they can’t afford.

Other first-time homebuyers are increasingly making offers on houses they’ve shopped for online and through social media. While the move is second nature for a digitally savvy generation, it also proved to be an easier and less time consuming process for those buying a house in an area they’re not currently residing in and a way to move swiftly when houses are flying off the market. But some may be realizing their new house isn’t all it seemed to be behind the screen.

As Thao Le, a professor of housing economics and real-estate finance at Georgia State University, told Borden, “The trajectory of the pandemic, and thus the economy, is still very much unpredictable.” She added that before committing to homeownership, “aspiring buyers should evaluate their financial situation and job security carefully.”

Are you a millennial having a tough time buying a house right now? Email hhoffower@insider.com with your story.

Read the original article on Business Insider

The pandemic changed everything about how affluent millennials view wealth

wealthy millennial
Wealthy millennials view wealth differently thanks to the pandemic.

Wealth no longer means what it used to for high-net-worth millennials.

The pandemic has caused the wealthy to alter their lifestyles and reassess their priorities, changing how they perceive wealth in the process, a new report by Boston Private found. The report, titled the Why of Wealth, surveyed high net-worth individuals with at least $1 million of assets.

Millennials, who turn ages 25 to 40 this year, changed their perceptions of wealth the most. More than three-quarters (89%) said the pandemic altered the way they define wealth. The generation was also most likely to say the pandemic shifted their wealth priorities and their emotions about wealth, with 85% of respondents feeling this way about each change.

Both Gen X and Gen Z felt fairly similarly, with at least three-quarters of each cohort identifying in the same way for nearly all these sentiments. However, it’s a sharp contrast from baby boomers and the silent generation. Less than a quarter (24%) of both generations combined said the pandemic changed their perception of wealth. The report attributes this to their age, as they’ve already experienced significant cultural milestones and being more settled into a certain mindset.

More millennials (as well as Gen X) associate wealth with success and happiness, whereas boomers and the silent generation are more likely to view wealth as peace of mind and independence. “For these younger generations, wealth is a key contributor to creating a comfortable, happy life, and is directly related to achieving important goals, having a good family life and being a positive contributor to community and society,” the report reads.

Older generations feel less able to use their wealth on enjoying life as much as they’d like to right now, according to the report, whereas younger generations are possibly using their wealth to enjoy life more than they feel they should.

What’s more is that this shift in perception of wealth has also affected millennials’ wealth goals – 78% said the pandemic changed how they planned to use their wealth in the future, compared to 26% of baby boomers and the silent generation.

Saving has been up across the board during the pandemic, as the US household net worth hit a record in the fourth quarter, up 5.6% from the third quarter. Many wealthy Americans were able to tuck away excess cash, with wealthy millennials tucking away as much as $3,000 a month. Some have increased their retirement savings or readjusted their financial plans plans as a result.

But whether this shift in wealth perception and goals is temporary or permanent remains to be seen.

Read the original article on Business Insider

High-earning Americans drove 2020’s migration boom, and it shows how wealth is splitting the millennial generation

suburbs
High-earners were most likely to move and buy a house in 2020.

Americans stopped moving around the 1980s, but that changed last year with remote work.

A new Apartment List report that surveyed 5,000 Americans and analyzed US Census data has confirmed the migration narrative of 2020: Remote work ignited a residential migration rebound as the number of movers increased by 14% to 16% from 2019 to 2020 – it was the first US migration increase in over a decade.

This has big implications for millennial homebuying in particular and wealth inequality in general. The ApartmentList data shows the migrants were largely high-income, meaning that migration was K-shaped, just like the uneven economy born by the coronavirus pandemic. With migration has come a boom in homebuying, and millennials have taken the lead in homebuying, with high-net-worth millennials at the top of the K.

Although the study doesn’t break down generational data, millennials likely comprise many of the high-income households, defined as those earning over $150,000. A previous Apartment List report revealed that the millennial homeownership rate climbed to 47.9% from 40% just three years ago. Many of these millennial homebuyers were likely the same as the 16% of high-income workers that moved over the past year, a 39% jump from the Census Bureau’s estimate of American migrants in 2019.

This marks a sharp contrast from the past decade, in which lower-income workers led migration patterns. Low-income households moved during the migration boom as well, per the report, but the high-income group is more likely to work in flexible jobs. They’ve taken advantage of remote work to move across the country in search of more space and more affordable housing.

Apartment List also found that high-income workers were twice as likely to purchase a home as low-income workers, which dovetails with millennials reaching peak homebuying age during the pandemic and leading the housing recovery. Historically low interest rates made more types of homes viable for the generation, at least for those who had enough money saved to win out bidding wars in a cutthroat market.

Other millennials were priced out as housing prices reached record highs, while others still couldn’t even fathom becoming homeowners. Many moved back home with their parents during the pandemic, either temporarily or permanently. According to a Pew Research Center report, 52% of young adults lived with at least one of their parents as of July 2020, topping the last high of 48% many decades ago, in 1940.

The millennial wealth gap

This migration divide exemplifies the intragenerational millennial wealth gap, which has widened during the pandemic. Such millennial inequality dates back to the Great Recession, with wealthier millennials faring well while their low-earning peers are struggling.

The affordability crisis millennials were already facing prepandemic has left some with little wealth to fall back on as they experience unemployment and other hardships during the coronavirus recession, causing some to move back in with their parents. But a smaller, higher-earning group with stable income has been able to save, invest, and even buy homes with extra money they would otherwise spend in non-pandemic times.

Millennials are experiencing their own K-shaped recovery, uniquely compounded by two recessions. Generational researcher Jason Dorsey, the president of the Center for Generational Kinetics, previously told Insider this could lead to an unequal recovery between these two groups, with those those who lost a job recovering longer than those who began the pandemic with a better financial backstop.

This uneven rebound might have an effect on migration as well. As the report concludes, continuing migration patterns could further redistribute wealth away from the country’s biggest and priciest cities.

Read the original article on Business Insider

Millennials are getting screwed again by their second housing crisis in 12 years

open house
A heated housing market marked by low inventory and high prices is pushing homeownership out of reach.

America is running out of houses amid a historic housing shortage and all-time high selling prices.

A recent bank note from Jefferies revealed the US is short 2.5 million homes, while Freddie Mac put that estimate higher, at a shortage of 3.8 million. There are 40% fewer homes on the market than last year, a Black Knight Report found.

It’s bad news for many aspiring homebuyers – but especially for millennials. It’s just the latest chapter in a long line of bad economic luck.

Daryl Fairweather, chief economist at Redfin, told Insider it’s unfortunate the generation that suffered from the last housing crisis – entering the job force in the middle of a recession – is now facing a different kind of housing crisis. “Now that they have [somewhat] economically recovered and are looking to buy a home for the first time, we’re faced with this housing shortage,” she said. “They’re already boxed out of the housing market.”

The shortage is a result of several things: contractors underbuilding over the past dozen years, a lumber shortage, and the pandemic itself. It comes at a time when millennials have reached peak age for first-time homeownership, according to CoreLogic, leading the housing recovery. But such increased millennial demand has exacerbated the shrinking housing inventory.

Housing was largely an out-of-reach dream for millennials for years. Even before the pandemic, they were struggling to take advantage of historically low mortgage rates. But rates dropped even further after the coronavirus arrived, fueling a yearlong housing-market boom that never abated and soon morphed into an inventory crisis.

While CoreLogic says millennials are set to drive the housing sector for a long time to come, they won’t have an easy time of it if skyrocketing prices and tight inventory create new affordability challenges. Just as homeownership fell within their grasp, it’s slipping out of their fingers yet again.

Not enough homes since the Great Recession

A dozen years after a housing bubble spurred the financial crisis of 2008, many millennials have found themselves juggling the lingering effects of the Great Recession with the coronavirus recession, staggering student debt, and soaring living costs.

Chief among the latter has been the price of homes. By 2018, millennials buying their first home were paying 39% more than boomers did at the same age nearly 40 years ago. The increasing cost of a down payment made it even more difficult for millennials, already struggling to build wealth, to save.

Then came the 2020 housing boom.

house building construction
Contractors haven’t been building enough homes in the past dozen years.

Millennials led all generations in homebuying last year, according to Apartment List’s Homeownership report, accelerating a five-year trend in millennial homeownership rates rising the fastest. The millennial homeownership rate climbed to 47.9% from 40% just three years ago, per the report. The Jefferies note also highlighted that homeownership rates have increased among those ages 25 to 29 and especially accelerated for those ages 30 to 34. The same note also noted the underbuilding of homes dating back to the Great Recession.

“We’ve been underbuilding for years,” Gay Cororaton, director of housing and commercial research for the National Association of Realtors (NAR), told Insider. She said the US has been around 6.5 million homes short since 2000 and is currently facing a two-month supply of homes that should look more like a six-month supply.

There have been 20 times fewer homes built in the last decade than in any decade as far back as the 1960s, according to Fairweather. She added that’s not enough homes for millennials, who are the biggest generation, to buy.

The pandemic and a lumber shortage worsened the situation

Further driving the housing scarcity is the pandemic itself. Some owners aren’t listing their homes as a safety precaution, Cororaton said. Others are wary of putting them on the market for fear of being unable to find an affordable replacement to buy.

Cororaton said there might have been more homes on the market absent a historic lumber shortage. Lumber factories shut down almost immediately last March due to safety restrictions. When the housing market opened up, Americans bought more new houses than the lumber industry could keep up with. As demand spiked, lumber prices jumped by almost 200% since April 2020. It led to an average unexpected price increase of $24,000 for new homes in the past year, per NAR, one aspect of a nationwide record-high rise in housing prices.

Home prices have been shooting up for years, at a steeper rate than they did ahead of the Great Recession. But the national median home-sale price hit a new high of $353,000, per Redfin. Housing prices are up 18% year-over-year, Fairweather said: “I don’t see values going down at any point.”

housing
A lumber shortage isn’t helping the flow of newbuilds – or housing prices.

The shrinking housing inventory further inflamed a market already hot with demand, sparking cutthroat competition. The typical house is getting snatched up in less than a month as aspiring homebuyers find themselves in bidding wars, putting in all-cash offers, and offering higher down payments.

Cash sales have increased from 18% to 23% in the past year, and first-time home buyers are more likely to put down a full 20% down payment than they were last year, according to NAR. “Because the market is so tight, you want to sweep in and make your offer more attractive,” Cororaton said, adding that a 20% down payment is more appealing to the seller because it signifies financial capability.

Every home sold in March saw nearly five offers on average, compared to two offers in 2019 and 2020 at the same time. Seeing some houses with multiple offers, some buyers on tight budgets aren’t even bothering to jump into the bidding war.

Losing an avenue for building wealth

A heated market running low on homes and high on competitive demand has ultimately set a new pricing precedent that is pushing homeownership further away for many first-time buyers. Although the wealthier cohort of the millennials may be better positioned to buy a home, even those who successfully managed to scrape together some savings are facing dwindling chances of homeownership.

Owning a home is a traditional way of building wealth through equity, but the increasing cost of such an investment is eliminating such an opportunity for many. This is particularly troubling for millennials, some of whom already have less wealth than past generations at their age. Losing housing as a wealth avenue could further widen the generational wealth gap between them and boomers, adding to the vicious cycle of millennial economic woes.

“The bottom line is, [homeownership is] going to be more difficult for millennials,” Cororaton said, adding that some of them are still dealing with debt.

Portland houses house suburbs
A tight, expensive housing inventory is just the latest economic challenge for millennials.

Contractors need to ramp up new builds if they want to satisfy growing millennial demand, per Jefferies – as many as 1.7 million to 2 million new homes per year, maybe even more to fully repair the imbalance. Housing starts rose to 1.7 million in March, but Cororaton said building new homes is also the beginning of addressing the housing issue.

New-construction homes can be expensive for buyers. While an increase in supply would relieve pressure on prices, she said, down-payment assistance would be helpful. And when more homes are built, she added, we should allow for higher density housing, which would mean changing zoning laws and regulations. But as she put it, “that’s easier said than done.”

While builders are doing everything they can to build so they can take advantage of a hot housing market, Fairweather said, challenges like the lumber shortage, a lack of skilled labor, and shipping shortages – affects the appliances that going into a home – aren’t helping.

“All the shortages right now are definitely not helping us figure our way out of the hole, but even without those challenges, the hole is humongous,” Fairweather said. “So it’s going to take decades of building lots and lots of homes.”

Read the original article on Business Insider