When it comes to investing money, most people are influenced by two main experiences, the beliefs of their parents, which will have been drilled into them as a child whether deliberately or inadvertently, and their own experiences in life. Millenials are now the largest generation of Americans; there are about 75.4 Millennials compared to the second largest group the baby boomers who account for about 74.9 million.
This is important in any discussion because the habits and actions of such a large group can cause the needle to move when it comes to their investment strategies.
Stock Market Investments have fallen out of favor in recent years, particularly with Millenials. There are some theories as to why this may be the case, but the prevalent reason would seem to be that most Millenials experienced the biggest crash since the great depression, and saw first hand the effects a crashing stock market causes.
For the vast majority of Millenials, the recession took place when they were in college or just about to leave college with a suitable degree and dreams of prosperity and employment. When the stock market crashed, companies were laying people off in their thousands, not employing new members of staff. For many Millenials, there remains a feeling of distrust and blame attached to the stock market, which real estate seems to have avoided.
Although there was a real estate crash as well, provided their family did not lose the property, then the extent of the damage was not as extreme to students in college. Of course, both markets have recovered their pre-crash prices, and even surpassed those levels, but in the minds of the Millenials the stock market is not to be trusted, and real estate has become their primary and preferred form of investment.
Millenials are also a lot more transient and happy to move to different locations, and this may also provide some of the reasons why real estate is proving so popular. Far from simply recovering the losses of 2007 and 2008, certain cities house prices are shooting up on an almost daily basis. Those cities also tend to be the popular millennial destinations, such as Portland, Denver, and Austin. This might actually give certain groups of Millenials a biased view of the situation but certainly, adds to their view that real estate is the number one safe choice for investment.
Part of the problem of owning shares is that they are simply a number on a piece of paper or computer screen. There is very little that an investor can do if indeed anything to improve the share price, and so many Millenials feel a little powerless when it comes to the stock market. With real estate on the other hand, as many online websites and investment gurus frequently tell them real estate can be seen, touched and improved. They only have to watch one of the many thousands of different property investment shows on the television, to get bitten by the property bug. Without wishing to sound stereotypical Millenials are much more image orientated and visually motivated than some previous generations, so again property is appealing.
With more and more Millenials hitting the age where they are starting families, looking to purchase a home for those families, and also keen to find a suitable investment vehicle that will become a valuable asset, the demand for properties is on the increase.
This then starts a self-fulfilling cycle, where the prices of properties are forced up, making real estate appear to be an even greater investment. It also can create an element of panic amongst Millenials who fear that if they don’t jump onboard the property market quickly, they may never be able to afford the price of entry.
Millenials also tend to be very internet savvy, having been the first generation to grow up with the internet being a central part of their lives. This means that they can research and utilize real estate investing platforms, to provide their deposit. Not only does this save them thousands of dollars initially but also drastically reduces the amount of time they need to begin the property purchasing process. Long gone are the days of saving for years to have a sufficiently sized deposit. Once again this only adds fuel to the fire of the property market, making it an ever more attractive option.
The Millenials generation is in love with using property investment as a way of investing in their future, and that shows no sign of changing. Stocks and shares it seems may soon be viewed as a blast from the past.
© 2016 Connecticut Real Estate Investors Association. All rights reserved.