Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
No surprise that we are seeing a big change in attitudes towards housing ownership among the younger generation. There are a lot of things stacked against them – global wage arbitrage has pushed down wages for many, new college grads who enter the job market tend to have lower wages then those who do not [May 9, 2009: The Curse of the Class of 2009 – Lower Wages for Up to a Decade], and they are graduating with far more debt then their parents [Oct 19, 2011: Student Loan Debt Continues to Hit New Records]. Not to mention many see what happened to their parents in the “can’t lose” housing market during the past half decade. That said, it appears renting is going far beyond just housing (furniture, clothing) as lower wages conspire with the American need/desire to consume.
Bloomberg takes a closer look:
- Anselmo and many of his peers are wary about making large purchases after entering adulthood in the deepest recession and weakest recovery since World War II. Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible.
- As the Great Depression shaped the attitudes of a generation from 1929 until the early years of World War II, so have the financial crisis and its aftermath affected the outlook of young consumers like Anselmo, said Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers. “This is a generation that is scared of commitment, wants to be light on their feet and needs to adjust to whatever happens,” said Zukin, who’s researched the effects of the recession on recent college graduates. “What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it.”
- Enterprise Holdings Inc. and Hertz Global Holdings Inc. (HTZ) are expanding in …the $1.8 billion hourly car- rental business, a segment dominated by younger drivers and made popular by Zipcar Inc. (ZIP). The by-the-hour segment accounts for about 6 percent of the $30.5 billion U.S. car-rental market, a share that is forecast to rise to about 10 percent in five years, according to IBISWorld. Those 34 and younger make up 84 percent of Hertz’s by-the-hour customer base.
- Startups such as Rent the Runway Inc. are supplying high-fashion apparel to satisfy those who want to wear, not own. CORT, a unit of Berkshire Hathaway Inc. (BRK/A), is increasing its furniture-rental marketing efforts to college students and fledgling households, said Mark Koepsell, CORT’s senior vice president.
- “Renting makes a lot of sense,” said David Blanchflower, professor of economics at Dartmouth College in New Hampshire and a Bloomberg Television contributing editor. “They have no money and they are not buying fridges and they are not buying the things they normally buy when they set up homes. Their incomes are a lot lower.”
- College graduates earned less coming out of the recession, according to a May study by the John J. Heldrich Center for Workforce Development at Rutgers. Those graduating during 2009 to 2011 earned a median salary in their starting job $3,000 less than the $30,000 seen in 2007.
- The majority of students owed $20,000 to pay off their education, and 40 percent of the 444 college graduates surveyed said their loan debt is causing them to delay major purchases such as a house or a car. The U.S. Consumer Financial Protection Bureau said in March it appeared student loans had reached $1 trillion “several months” earlier.
- The shifting attitudes also pose a threat to retail sales, said Candace Corlett, president of New York-based retail- strategy firm WSL Strategic Retail. Younger consumers are already comfortable buying used items and borrowing from friends. Renting will only reinforce their tendency not to buy new.
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