The Millennial generation (born between 1982 and 1996) comprises the second largest population in the United States. Only the Baby Boomers are a larger cohort. Large groups of similarly aged people tend to have commonalities in their consumption patterns, and as a result, a good investment strategy over the years has been to follow populations as their consumption patterns change. Baby Boomers made a progression (some of these overlap) from household spending to leisure spending to investment spending to health care spending. Millennials, however, have frustrated demographers by failing to follow expected consumption patterns while in their 20’s.
- Average marriage age now aligns with the average Millennial age.
- Millennials are buying cars.
- Competition for smaller houses delayed household formations.
- Purchases of home furnishings are finally expected to grow.
Did you hear the one about the Millennial?
Plenty of jokes are repeated about over-educated, under-employed Millennials living in their parents’ basements. As with all good jokes, there is some truth to the punch line. Millennials went to college at greater rates than previous generations (36% compared to 32% for Gen X), and their average age at graduation ranged between 23 and 24 years old. This average age at graduation is up nearly two years from that of the previous generation. Many things could have caused this, ranging from starting college later, to changing schools, to changing majors, to lack of academic achievement. Longer college terms yielded high student loan balances, and according to consumer surveys, jobs were not plentiful until 2016, preventing some loans from being serviced. More college and more time in college resulted in a financial hurdle which looks to have delayed household formations. In 2017, 46% of Millennial homebuyers reported having more than $25,000 in student debt.
Tracking previous generations, Millennials would have started household formations by now. The average Millennial is 29 years old, and the peak Millennial birth rate (1991) means the US has more 27 year olds than any other age group. Household formation correlates to marriage. Population statistics from the US Census show a rising average age at the time of marriage, and currently, men marry at 29 and women marry near 27 years of age. Looking at historic birth rates by sex, 2018 will mark the peak in 29 year old men and 27 year old women in combination, not that those ages represent exactitude. Marriage percentages have been falling for decades, but still 70-75% of Millennials are expected to enter into traditional marriage. Given older ages at marriage, the ages of first marriage and the age at which a woman first gives birth are close together. You might get invited to a lot of weddings and showers in the next year or two.