2 Housing Facts That’ll Make You Feel Bad For Millennials

Bank of America says boomers won, millennials lost on housing [View in browser]( [The Juice Logo] Proprietary Data Insights Top Financial Pro Home Improvement Stock Searches This Month Rank Name Searches #1 Home Depot 80 #2 Lowe's Companies 21 #3 Ll Flooring Holdings 5 #4 Floor & Decor Holdings 2 #ad [Are Alternative Investments a gray area?]( Brought to you by [The Spill]( [Daily Stock Picks with Expert Analysis]( [ The Spill - Daily Stock Picks with Expert Analysis]( Searching for the right stocks to buy is exhausting. At The Spill, we have you covered with ratings and expert analysis – direct to your inbox. [Subscribe now.]( 2 Housing Facts That’ll Make You Feel Bad For Millennials Or maybe not. Maybe you’re like screw millennials. They’re a bunch of idiots. We don’t know. All we do know is you can argue that millennials got screwed on housing. In a research note, Bank of America (BAC) makes this case. The Juice agrees. However, we’re not crying a river for millennials. If you really want to own a home in this country, you can do it. In a minute, we counter a position we took on housing last week, as we wrap up October’s Housing is Haunted series. But first … Before we let you feel sorry for or bash millennials a little more, BofA said something else in its note that piqued our interest: Boomers typically spend less on big ticket items (housing and autos), but spend more on health care, home improvement and slightly more on entertainment. As ultra-low rate mortgages incentivize people to live in their homes longer, we could see increased home improvement spending by wealthy Boomers. Well, oh well. Bank of America must read The Juice! Because [here’s what we said last week]( in reference to home improvement stocks, particularly Home Depot (HD): Yes, management dampened expectations for the year, but that’s to be expected in the current economic environment, particularly amid the housing crisis. But, here again, don’t lose sight of the fact that this is a housing crisis negatively impacting a relatively small number of people. As we got at it in the excerpt above, homeowners with low interest rates and a shit ton of home equity can complain all they want about being trapped in their homes. If they consider this a problem, they best consider it a good one to have. To soothe themselves, more than few will embark on home improvement projects. This will benefit Home Depot and Lowe’s. Last week, HD and Lowe’s (LOW) each lost another 3.5%. During market downturns, there’s always opportunity for long-term investors. This is one example of that. BofA echoed something else we said in that Juice from last week. That this housing crisis we’re in is only affecting a small number of people. In BofA’s eyes, it’s millennials: Everyone locked in 3% mortgage rates, except Millennials. On the cost side, most Boomers locked in low mortgage rates, where the effective mortgage rate remains below pre-COVID levels. The only group that took out mortgage debt meaningfully since 2021 is Millennials, seeing a 20% jump. So, basically, millennials got screwed. Fact #1: People under 35 (including younger millennials) are less likely to be homeowners than people over 35. Fact #2: 30-to-39 year old millennials are the only age group with credit card delinquency rates higher today than they were prior to the pandemic. Yes, fact #1 is a reality of this housing market, particularly interest rates. However, isn’t it always the case that older people make up the largest share of homeowners? And fact #2 relates to housing because, if you’re carrying all of this credit card debt, it makes it that much more difficult to be able to afford a home. Bonus fact #3: Even though they make up a relatively small share of homeowners by age, millennials spend more money on housing than other generations. Obviously, that’s due to high prices and interest rates just as millennials hit that age where, traditionally, people become homeowners. Which ties to the argument we made last week when we warned young people not to buy a house: With the interest rate on a 30-year mortgage at 8.0%, you’re looking at a monthly payment of $4,175, including taxes and insurance, after a 10% down payment on a $500,000 home. Do you really want to part with $50,000 then be on the hook for $4,175 a month – plus maintenance and unplanned expenses – for the next 30 years or so? What kind of life is that? … Home ownership only makes sense if it makes you better off financially today and for the rest of your life than you are today. The days of struggling for a few years to build equity — of being house rich, cash poor — are long gone. Today, the American dream is more about having cash in your pocket and the bank alongside a relatively low housing expense than it is signing your life away simply to be able to brag that you’re a homeowner. Simply put, in the current environment, home ownership might only add to, rather than help alleviate your personal financial burden. So, if you’re young facing this housing crisis, maybe you ought to think twice. Now, admittedly, we approach this from the perspective of a young person who wants to live in a place where typical homes go for $500,000 and, likely, a lot more. America’s large and medium-size cities and metro areas. If you’re willing to live in a smaller place, which just might be an up-and-coming urban area, you can still become a homeowner. And at a reasonable price. Realtor.com put together a list of the 20 best places to do just that. Here it is — city name, followed by the median list price of a home there. - Topeka, KS ($250,000) - Elkhart, IN ($280,000) - Oshkosh, WI ($317,000) - Fort Wayne, IN ($312,000) - Lafayette, IN ($293,000) - Racine, WI ($352,000) - Manchester, NH ($535,000) - Concord, NH ($550,000) - Columbus, OH ($380,000) - Johnson City, TN ($425,000) - Kingsport, TN ($325,000) - Jefferson City, MO ($318,000) - Springfield, OH ($200,000) - Santa Maria, CA ($1,895,000) - Dayton, OH ($240,000) - Janesville, WI ($320,000) - Canton, OH ($235,000) - Knoxville, TN ($475,000) - Hartford, CT ($400,000) - Worcester, MA ($490,000) In a couple cases, it’s all relative. For example, $1.895 million in Santa Maria, CA is a lot of money. However, it’s a coastal city near Santa Barbara in Southern California. Under $2 million that close to the ocean is, yes, a “bargain.” Similar thing with Worcester, MA, which might attract people priced out of Boston. But, for most of the other names on the list, we’re talking affordability. Put 20% down on the typical home in Columbus and you’re looking at a monthly payment of $2,738, even with an 8% interest rate on the 30-year. It’s even more attractive in Topeka, where your monthly payment would be just $1,801. The Bottom Line: This exercise underscores our point. If you’re dropping several thousand bucks a month on rent in a big city where you have zero chance of becoming a homeowner, you need to be willing to move and live in a decidedly different environment. That is, if becoming a homeowner matters that much to you. Exchanging $3,000 rent in, say, LA, Portland or Austin or even higher rent in San Francisco or New York for one of these mortgage payments can make sense. Because — all else equal — it instantly puts you in a better position today and going forward as a homeowner than you were yesterday as a renter. 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