The Millennial Perspective: Is a Tiny House the New American Dream?
Have you ever gotten sucked into a TV marathon? Generally for me they are lazy Saturdays where a cup of coffee on the couch turns into multiple hours of binge watching (cough cough, thank you Netflix). My most recent foray into TV bliss was HGTV’s ‘Tiny House’. The concept is pretty straightforward – it’s about people who decide they want to simplify their lives and build a 300-500 sq/ft house. After watching more episodes than I’d like to admit, it became pretty clear to me that there were some common themes among those who had chosen this lifestyle:
• Many tiny houses are on wheels and made for travel.
• Many tiny house owners were actually pet-owning couples.
• Many tiny house dwellers were millennials.
The third theme really struck me because it echoes a sentiment I’ve seen in the financial sector over and over again – millennials are conservative investors. There has been a change in the way the millennial generation evaluates and takes risk in terms of real estate, investment portfolios and life in general.
Recently there has been a shift to urban living with millennials leading the charge. Many millennials are rejecting suburban life, opting for a live-work-play lifestyle where everything is within a “walkable” radius. The result is great for downtown restaurants and coffee shops but is starting to impact the housing market. Downtown living generally results in millennials renting for longer and avoiding one of life’s longest term investments – a mortgage. While most would argue there is value in the equity build a mortgage provides, there is no doubt it can add a huge fixed cost for millennials to stomach. Perhaps that’s why some millennials have turned to tiny houses. With a median cost of around $50,000, tiny houses are less of a financial burden and leave owners with more disposable income to pay down student loans, use for travel (queue wheels) or even stockpile at their local financial institution.
Statistics are hard to pin down, but many gauge that around 50% of millennials are renting, 25% of millennials are living with their parents and 25% are home owners. It begs the question, if 75% of millennials have never come up with a 20% down payment, where is all their cash going? Investment News recently published an article describing the growing population of millennial super savers, those stockpiling 15% or more of their annual income into their 401k. Millennials may account for more than 30% of the $1.2 trillion student loan debt but there are many who are juggling the challenges of paying down debt and saving for the future at the same time.
Millennials, like all generations, are a product of the environment, culture and economic condition they are raised in. Over the last couple of decades we have seen first-hand the impact of the 2008 financial crisis, natural disasters like Hurricane Katrina, domestic terror events like Columbine and 9/11, and the exceptional rise of national debt. It appears that these events and others have shaped millennials into agile, flexible adults who want to be ready for the unknown. By avoiding a mortgage, and/or buying a tiny house on wheels, it would seem that as the next couple of decades unfold millennials will be able to adapt quickly to a changing jobs, changing politics and hopefully find their “American Dream.”