The Millennial Generation Falls Behind

Comments Off on The Millennial Generation Falls Behind
The Millennial Generation Falls Behind

As the housing market begins to rebound and the stock market continues to climb, many Americans are getting back to where they were before the Great Recession wiped out much of their wealth. But not everyone is benefitting equally. Compelling new data show that younger Americans were hit hardest during the downturn, and—unlike the members of older generations—they still have a long way to go before they can join in the recovery. The long-term implications for the economy are unsettling.

According to research by economists William Emmons and Bryan Noeth of the Federal Reserve Bank of St. Louis, on average, Americans over the age of 40 are now at or above their 2007 level of wealth adjusted for inflation. Meanwhile, Americans 40 years old or younger have still only regained about one-third of the wealth they lost during the recession.1

What's the explanation? Based on data from the Fed and other sources, the Trends editors have identified four factors:

  1. Millennials lost more of their wealth in the housing crash.
  2. Their incomes are much slower to recover.
  3. They are still burdened by the crushing weight of student loans.
  4. They are less likely to have participated in the equities boom.  

Let's start with housing. Emmons and Noeth found that younger families lost a greater share of their wealth when the housing market crashed because their homes accounted for most or all of their wealth. Older families were more likely to have other assets, such as stocks, which have soared since the Recession.

Making matters worse, younger families typically borrowed most of the money for their homes, whereas older families often sold a previous home, which allowed them to make much larger down payments. When housing values plummeted, younger homeowners quickly found that their property values were underwater.

With banks tightening credit in the wake of widespread mortgage defaults, many young adults were unable to refinance their homes at lower rates because they owed more on their homes than those homes were worth. Those who couldn't keep up with their payments were faced with two unpleasant choices: Either sell their homes at a loss, or lose their homes to foreclosure.

As a result, according to data from the U.S. Census Bureau's Current Population Survey, between 2005 and 2013:

  • Homeownership rates for people under 40 fell 8 percent, from 50...

    To continue reading, become a paid subscriber for full access.
    Already a Trends Magazine subscriber? Login for full access now.

Subscribe for as low as $195/year

  • Get 12 months of Trends that will impact your business and your life
  • Gain access to the entire Trends Research Library
  • Optional Trends monthly CDs in addition to your On-Line access
  • Receive our exclusive "Trends Investor Forecast 2015" as a free online gift
  • If you do not like what you see, you can cancel anytime and receive a 100% full refund