• by Jack Loechner , Staff Writer @mp_research, October 15, 2014

According to a new report from Nielsen, authored by Louise Keely and Jeremy Burbank, as Boomers "age out," the Millennials age in,  they are playing an increasingly critical role in an economy continuing its long slow mend. Millennials are no longer Generation Next, but rather Generation Now.

Millennials are a unique generation, says the report, which makes now the time that a number of myths need to be dispelled, or at least qualified, lest they upend company strategies and government policies unnecessarily.

Myths like Millennials are going to wreak havoc on the U.S. economy and housing market as they eschew ownership of homes, cars and anything else that does not fit into a backpack. And, that they will all move to the cities and rent, that they don’t want to own things, that they won’t need cars, and there will be a massive slump in demand because they’re all living in their parents’ basements. Not completely true, says the report.

A study by The Demand Institute on Millennials and Their Homes, including

interviews with more than 1,000 households headed by Millennials (those between the ages of 18 and 29) finds that the weight of Millennial influence on the economy and housing market will be significant over the next five years.

And, it is true that there are more college graduates living in their parent’s or parents’ basement than there used to be, and when they do finally begin to make their own way, many will move to the city, and some of them will surely defer buying a house, says the report.

That said, however, insofar as more graduates disappeared down the basement stairs, slowing the recovery, their emergence will trigger the reverse – something closer to a burst rather than a steady trickle of new economic activity. The Demand Institute projects that while today’s 18 to 29 year olds account for just 13.3 million U.S. households (11% of the total), their ranks will swell to nearly 22 million households by 2018 as they breakaway from parents and roommates.

Expectations are, according to the study, that Millennials will spend about $2 trillion on home purchases and rent in the next five years – more on a per person basis than any other age cohort. This is the house-buying generation. That they aren’t as flush as previous versions of this age cohort may alter their timeline somewhat, but it won’t utterly transform the basic lifecycle of the typical American.

While the survey showed that most Millennial movers will rent next, more than eight in 10 already own or plan to own their own home someday. Based on stated aspirations, there is no reason to believe that this generation will be any less likely to own their homes. Multifamily demand should remain strong in coming years due to strong demand for rental units, but the single-family home remains the ideal as Millennials seek larger living spaces, not smaller ones.

Something true of just a part of this cohort has expanded in the public imagination to take in the whole group. But, the larger part of the cohort is looking to start families and find settled places to live, so this group will be looking for space, safe neighborhoods and decent schools. And, considering “affordable” as well, that means suburban settings, as the survey figures suggest.

How can it be that so many features of the life choices of the previous generation will carry through to the current ones if graduates can’t afford homes because they are carrying more than $1 trillion of student debt, asks the report. There are several reasons, says the report:

• While student loans will, doubtless, delay ownership for some, higher education still leads to higher income and therefore higher rates of home ownership as graduates enter their thirties
• A good portion of those without a college education purchase homes, too. It’s impossible not to sympathize with those who carry a heavy financial burden as they leave college
• Even at today’s high numbers there aren’t enough of them to destroy the home-buying landscape, and they themselves know that their long-term earnings prospects are better because of the degree they have obtained

We are undergoing an evolution rather than a revolution, says the report. But even evolution requires adaptation. What, then, has changed, and what should the response be? The report suggested that a number of myths had gained currency precisely because they were true in part.

• In the near term, more Millennials will rent than the previous generation, and many do live in the city. That means companies in generational-transition businesses must adapt their businesses either by broadening their appeal to take in the Millennials that are doing things differently, or find a way to penetrate the cohort making traditional choices more deeply.
• Second, companies should recognize that even those making traditional choices may be making them … untraditionally. The suburbs and areas surrounding large metropolitan areas are going to remain important destinations for young families, but the ideal suburban location for Millennials may not be the same as it was for previous generations.
• Finally, even those who are moving out of the city continue to experience the pull of the city more than those who have come before them. Communities that can fuse the best of urban living (e.g., convenience and walkability) with the best of suburban living (e.g., good schools and more space) will thrive in the coming decade.

Concluding, the report says that “coming of age” during the Great Recession has left many Millennials at a financial disadvantage. Creating alternative mechanisms so that Millennials who aspire to the American dream can achieve it is a significant innovation opportunity in both the business and public sectors.

For more information from Nielsen about this study, please visit here.