Lazy, entitled, and irresponsible are just a few of the labels slapped onto the millennial generation by everyone from employers and parents to politicians and pundits. While some criticisms are certainly fair (safe spaces and trigger warnings are downright embarrassing), some of the efforts to pin our economic frustration on this group are unfair. Specifically, the fixation on homeownership is both judgmental and illogical.
Millennials aren’t buying homes at the rate generations before them did, and this is a concern for analysts who understand the effect this trend will have on economic growth. While these experts acknowledge that staggering student loans are posing a formable obstacle for millennials, it’s striking how unfair other facets of this conversation are, specifically, criticism of millennials’ spending habits.
An Australian property investor recently made international headlines for criticizing millennials for spending money on pricey avocado toast, blaming the “poor” purchasing decision for their inability to buy homes. While many critics were quick to point out the mathematical inaccuracy of such a statement, few have taken aim at the assumption that millennials even want to own their homes. Or that they value homeownership enough to make the necessary sacrifices to achieve it. Life requires making choices; we can’t have everything we want, so we make decisions based on personal priorities.
At the root of criticism of millennials’ spending decisions is a value judgement and a narrow view of the America Dream. Plenty of articles have been written about this young generation’s preference for experiences over possessions. The disapproving voices simply have different life priorities and either refuse or are unable to appreciate different spending preferences. They’ve resorted to criticizing experiential spending — traveling, food, and other activities — as irresponsible and even lazy.
Millennials Shift the Meaning of the American Dream
A bit of friction between generations is expected as social norms and cultural preferences change. Millennials aren’t refusing to get in line; they’re changing what it means to live the American Dream. While it’s certainly not a one-size-fits all, this generation is casting off the notion that ownership indicates success.
Not only are many millennials choosing to rent homes, but they prefer to borrow rather than own in so many areas of their lives: cars, boats, bikes, and, according to a recent Pew study “Millennials are the most likely generation of Americans to use public libraries.” There was a time when having a personal library was a significant status symbol! Today’s status symbols often take intangible forms like an extensive roster of countries visited, impressive work experiences, or completing physically demanding feats like marathons and Iron Man competitions.
The avocado-toast critic mentioned above went on to lament that “[t]he people that own homes today worked very, very hard for it, saved every dollar, did everything they could to get up the property investment ladder.” While millennials certainly have acquired a reputation for being lazy, the reality is, many millennials work very hard and choose to spend their hard-earned money on experiences — whether on travel or a daily $5 latte. This lifestyle is far more appealing to 20- and 30-year-olds than spending young adulthood “house poor.”
Homeownership Isn’t the Be-All of Finance
The fixation on homeownership is also problematic because it erroneously assumes that buying a place to live is always a good “investment.” This message is pushed just as hard on millennials as the idea that college and masters degrees — regardless of cost — are always wise decision. Homeownership, is in fact, consumption as John Allison points out in the “Free Market Cure.” Let’s break down the costs.
First, there is the upfront cost of buying, which includes the down payment, thousands of dollars on closing costs, and insurance. Then there are the costs of maintaining it: replacing major appliances, unexpected damage, and landscaping; and, possibly a few hundred dollars a month in condo fees. Let’s not forget annual property taxes. In my last inquiry into homeownership, I discovered that each year the taxes and fees for the condos I was considering were about as much as my upcoming Namibian safari. I’d rather go on a similar trip each year than own a condo. That is my spending preference.
Others, however, may enjoy owning and caring for a home more than they enjoy getting away or eating out. It comes down to personal priorities — neither choice is better than the other and the fact that we have these options is evidence of the freedom and opportunity the United States offers for individuals to author our own lives and design our own American Dreams. Remember, our Declaration of Independence notes that life, liberty, and pursuit of happiness, rather than “property,” is an inalienable right.
Sure, homeownership can be an investment, but is not necessarily the best investment. An individual’s time and money may very well be better spent educating herself on and investing in the stock market. An opinion piece in the Washington Post entitled, “Millennials aren’t buying homes. Good for them” interviewed economist and Nobel laureate Robert J. Shiller, who offered the following insight: “Over the past century, home prices have risen an average of about 0.6 percent per year … [i]nvesting in an index fund has, on average, far higher returns than owning, even after you take into account the costs of renting and the tax subsidies for buying.”
The Government-Fueled Mortgage Crash Scarred Us
It’s also important to consider how experiences have shaped millennials’ decisions to hold off on taking on an illiquid asset and a mortgage. The 2008 economic crash and subsequent years of economic lethargy is a fresh experience — some experienced it through income stagnation, some lost their jobs, some couldn’t find one for years, and other, younger millennials watch their parents suffer. Flexibility is important to this group. They’re wary of tying themselves to more debt or anchoring themselves to a location. The ability to pick up and follow job opportunities is something they value.
Considering a deeper look at the explanations for delaying home-buying offered in this article, it’s possible that millennials haven’t been given enough credit for making good decisions. The voices guiding in their teenage years told them that higher education was the silver bullet to success and to just take out loans. Millennials now find themselves carrying tens of thousands of dollars in student debt. They will spend decades working to pay it off, and those same voices are now telling them to be “responsible” and start putting their earnings into a home.
It seems pretty logical that this generation is loath to take on more debt in the form of a mortgage. Perhaps millennials are actually looking at the facts before them, being thoughtful about what kind of life they want to live, and making decisions accordingly. If older generations and experts are going to scrutinize and advise, a better area to focus on is saving.
Millennials Can Save When They Want To
But then again, they certainly haven’t been role models of success here. According to research by the Insured Retirement Institute, just 55 percent of Baby Boomers have some retirement savings and 24 percent have nothing at all. This is the generation that prioritized homeownership, and that decision certainly didn’t turn out to be the fool-proof track to financial stability.
Surprisingly, a recent article on CNBC.com reports that the percentage of millennials who report saving a portion of their incomes surpasses those of Baby Boomers or Gen Xers. The article goes on to cite a Merrill Edge report that “Millennials say they save 36 percent more than their counterparts, with more than one-third (36 percent) setting aside more than 20 percent of their salary per year.”
While the article notes that millennials are saving for short-term, rather than long-term goals, the finding reveals that this generation isn’t as irresponsible and directionless as critics claim. They’re observing and evaluating the paths generations before them took, thinking critically, and making intentional decisions about their own lives.
Regardless of how one chooses to spend his or her disposable income — on food, travel, homeownership, or any other way that adds texture to life — the underlying element to being financially responsible is to attentively cultivate a reservoir of savings, both for the inevitable “rainy day” and retirement. Encouraging a habit of short- and long-term saving, rather than pushing homeownership, is better advice for individuals and for our country.
The fixation on homeownership as a critical benchmark in adulthood is outdated. Millennials have developed their own priorities and paths. They’re not necessarily rejecting homeownership, but likely delaying it until it makes personal and financial sense. In “7 Habits of Highly Effective People,” author Stephen Covey advises to “begin with the end in mind.” I think many millennials do just that. They consider what kind of life they want to look back on, and having paid off a mortgage isn’t a story to tell their grandchildren.