And how they will impact high-end brands
To understand the heart and mind of a person, look not at what he has already achieved, but at what he aspires to.
That simple quote from Gibran helps me understand what’s going on in the housing market with Millennials. A couple of years ago, I theorized that as the economy continued to improve, we would see more millennials shift from rentals to home ownership, thereby impacting high-end home brands. At the time, Bloomberg even offered a timetable: “in the next two to five years, these Americans will gain greater access to housing, lifted by higher levels of education and a stronger labor market.”
Maybe it was a simple bet, but we’re seeing this prediction come to pass. Writing for the Wall Street Journal, Peter Grant and Laura Kusisto said, “Amid a hot housing market, the homeownership rate is now rising, in part because millennials are reaching the age when they’re forming families and settling down.”
They went on to point out that what’s fueling this growth rate are those who haven’t had “the money, credit or desire to pursue the traditional American dream.”
I’m fascinated by this distinction, because clearly there are prospective homeowners who want a home, but can’t yet afford the down payment or who don’t have solid credit. And yet there are others who do, but simply choose to remain in a rental. I’ve been wondering what separates those mentalities – and how that might impact the high-end marketplace?
It’s important because these first-time buyers impact the overall marketplace in a dramatic way. WSJ’s Kusisto says, “they bring new demand, allowing homeowners to trade up and stimulating demand for builders to construct new homes.”
Said another way, as more millennials enter the market as homeowners, there can be a cascading effect across the entire market.
What’s holding them back? The Pew Research Center points to marriage. “Wall Street is closely watching demographic trends, particularly marriage rates among millennials—a life change often accompanied by a shift from renting to owning. Millennials have been getting married later in life, often waiting until their late 20s,” wrote Pew’s Richard Fry and Anna Brown. “Their marriage rate over the next five years will likely play an important role in demand for apartments and houses.”
In my opinion, this is where aspirations come into play. Research shows that nearly three out of four renters say they would like to buy a home in the future – even with all of the challenges associated with buying a home. Millennials want to be in their own homes. Clearly, they are willing to put off marriage and wait until they feel the time is right – or until they are on solid enough financial footing to afford a home. But that doesn’t impact their desire to eventually buy. And while I can’t predict the macro-trends that will positively or negatively impact the economy in the coming year, I am bullish that the aspirations of this important group of consumers can continue to guide our efforts as marketers to impact their buying decisions.