With continued weakness in the job market, young people are too fearful to invest in a house or even a car. Instead, they are renting rather than buying, postponing such large purchases until incomes stabilize and they feel more confident about the future.
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This is likely adding to the drag on the economic recovery since this younger generation matches the Boomer generation in size, if not percentage of the population. Even though current demand for housing is rising, the rental market seems to be alive and well. This means a couple of things.
One, it means greater investment opportunities for your clients, both in the housing market as it comes back and also in the rental market. By focusing on both of these markets, investors may hedge their risks if the recovery in housing—and in the general economy—continues to rebound in fits and starts.
Second, it’s a prime time to begin building relationships with this younger, strongly influential generation. If you can help them plan financial and investment strategies—perhaps in conjunction with their parents—you have the opportunity to fortify relationships with both generations, strengthening relationships with current clients and forging new ones that may pay off as younger generations build investment capital.
The last time the economic and social backdrop of the nation—and of the world—had this type of impact on an entire generation
was during the Great Depression. The Great Recession may well produce a similar impact.
The Echo/Millennial generation is currently scared of making huge financial commitments and wants to stay flexible so they can roll with whatever happens. One difference this time is that renting was not a factor during the Great Depression.
The reticence to spend also affects the retail sector, i.e. consumer spending, which makes up 70% of gross domestic product. Stricter lending requirements and stiffer down payment mandates on housing are only exacerbating the issue.