Millennials dominate all the talk about economic trends. Given their size, that makes sense. As Millennials age, their preferences will help drive the business decisions of much of the economy. Knowing what they want will be a major concern for decades to come.
Like every generation before them, Millennials have their own identity, formed by their age and the economic opportunities they are afforded. And, as always, their tastes, demand for goods and services, housing preferences, marriage and family formation patterns, and overall impact on the economy will evolve as they move through their life cycle.
So, who are the Millennials? The authors who coined the term, William Strauss and Neil Howe, considered those born between 1982 and 2004 as being part of the generation. The starting and ending points are open to debate, so I assume Millennials are those currently in their late teens to mid-thirties.
Based on population, Millennials are now our largest generation. They make up about one-quarter of the population, with Boomers accounting for just a little less. In between, the GenXers constitute just over 20% of the population. When it comes to population size, the three major generational groups are similar. However, the relative importance of Millennials will increase as the Boomers pass on.
Not surprisingly, Millennials currently are behaving differently than previous generations. On the housing front, a significantly larger percentage of Millennials are still living at home compared to GenXers. Nevertheless, according to Trulia, more than 90% expect to buy a house.
Millennials are marrying, on average, nearly seven years later than did Boomers, and having children about five years later, according to Goldman Sachs. But more than 70% expect to get married and three-quarters want children.
Because of that lateness in household formation, when Millennials move into the more traditional family-forming period, there could be a large surge in housing demand.
Millennials now prefer renting to buying, and it is unclear when or if they will start buying homes at the pace of previous generations. The recession, slow recovery, and massive cost of education have made Millennials financially insecure. They are still early in their earnings life cycle, but their median income, as a percentage of total income, is lower than previous generations. The depressed incomes and greater student debt are making it difficult for Millennials to save and purchase homes.
Looking forward, Millennials are likely to take their more typical place in the economy. In five years, Millennials will be in their early twenties to forty and their lifestyles will have changed. They will have started marrying, having families and, hopefully, even moved out their parents’ houses. They will be well along in paying off their student debt. Millennials should be transitioning into the sweet spot in their careers for earnings.
And the lesson that holds for businesses is that conditions are changing. What you see now, when it comes to Millennial spending, is not likely to be anything close to what it will look like in the middle of the next decade. So start planning for that new world now.