Gen Y: The End of the Home Ownership Dream?

What a great time for first-time home buyers, right? They have the good fortune to buy at what may be close to the market low (we hope) without having to sell at that same low point. Well, as usual with Gen Y, it's not that simple. While the average age of first time home buyers is 26, realtors shouldn't expect waves of Millennials to be knocking on their doors. While the under 30 set may enjoy high incomes and high hopes for future earnings, both their attitudes about homeownership and the reality of high debt are certain to impact their likelihood rushing in to snap up real estate deals.

First is attitudes. Millennials do not aspire to the homes many grew up in. They see a big backyard and lots of square footage as a maintenance nightmare. Smaller living spaces and open space floor plans are likely to be their preferred way of life, for environmental as well as lifestyle reasons. The NewsObserver recently interviewed several Gen Y members on their dreams of homeownership. Here's what they said about the desirability of living in a big house:

Stephen: No. I want a smaller space so it's easier to take off and go. A house that's low-maintenance is good. Generation Y traveled a lot in college and will continue to do so through life. So a big yard isn't a plus, either.

Ryan: No. I think that seeing so many of our generation's parents divorce makes us understand that family togetherness is important. So as we start having kids you will see us avoid homes with a living room, family room and finished basement rec room in favor of open-plan homes where the family can share space.

Carrie: Definitely not. The huge space thing as a status symbol is gone. Well-used efficient space is best. I want a house that reflects who I am and where I've been. In big houses, people buy meaningless stuff just to fill them up. Living in a cookie-cutter subdivision with vinyl siding and no trees is not palatable to me.

Second is finances. Even if they aspire to home ownership, it's harder now to amass the necessary down payment of $30,000 or more. It's been widely reported that the average college debt is $20,000. Many struggle to pay it back, while making ends meet. Many still accept support from parents. Higher income Millennials in our focus groups, those with MBA's and good paying jobs, tell us of staggering college debt loads -- $60,000 or even $80,000. While these civic- and community-minded young adults are motivated to dontate to their college and other causes they believe in, they sheepishly admit it just isn't possible right now.

Add inexperience in budgeting and planning, credit card debt and the uncertainty of the job market, and the picture becomes even more grim. Consider these statistics from MSN (Why Gen Y is Broke):

The median credit-card debt of low- and middle-income people aged 18 to 34 is $8,200

People between the ages of 25 and 34 make up 22.7% of all U.S. bankruptcies (but just 14% of the population at large).

While the facts are sobering, Millennials are cautiously optimistic rather than dismayed. They have the long view, and are confident in their skills and abilities. As one young potential home buyer shared with me, 'With so much for sale, we can afford to be picky right now and get a really great deal.'

Millennials Get This Message: Beware of Debt

Marketing a cause to Millennials should be easy, especially when the cause is anti-marketing. Millennials are a prime target for financial services, but often see credit as 'free money'.... until they find themselves suddenly in debt. Truthout, in a blog post titled: Millennials: Debt Becomes You, informs us college students are more heavily in debt than ever.

The Federal Reserve says graduates now shoulder three times more debt than a decade ago, after adjusting for inflation. Undergraduates now average almost $20,000 in debt, with a quarter taking on more than $25,000, according to Robert Shireman, director of the Project on Student Debt, a Berkeley-based think tank.

The issue goes well beyond educational debt, however. College students graduate with $4,000 of credit card debt, on average, according to the U.S. PIRG Education Fund. The PIRG's FAll 2007 campaign, 'Truth about credit' shows a solid understanding of how to reach and motivate Millennials, and is worth a closer look. It starts with a web site, www.thetruthaboutcredit.com that explains the pitfalls of credit card debt and the marketing techniques used by credit card companies to lure new customers. PIRG goes further by sending out peer marketing teams to get students to sign petitions about marketing practices on campuses. The teams will look and act like a regular credit card company, working for a fictional company called "Feesa" (tagline: "Free stuff now. Huge debt later") and handing out lollipops saying, "Don't be a sucker." Volunteers fanned out across 34 universities last October, distributing information and collecting petition signatures to persuade colleges to establish specific "principles" regarding credit card marketing on campus. The principles include prohibiting the use of gifts in marketing on campus and blocking the sale of student lists. The volunteers wear blue Feesa shirts that are designed to look and sound like a real credit company (sounds like VISA).

Facecard (love the name) uses similar techniques to promote its pre-paid debit card. Facecard marketing teams will distribute informational packets on 50 college campuses around the country. The brochure, titled "Get smart. Get more," provides tips on budgeting, banking and preventing identity theft. Mobilizing Millennials to educate other Millennials and enroll them in the cause sounds like smart marketing to me.

What Moves Millennials?

This week Charles Schab and VW announced programs targeted to younger audiences. Gen X and Gen Y represents a new, and potentially deep, river of new customers for each of these brands. Will these campaigns have Millennial appeal? Let's look closer. Schwab: "We're trying to cater to these guys in ways that no one's catered to them before," (Marketing Daily, April 29). "No one's talked to them about the future; [other companies' messages are] mostly about savings and checking." Okay, but, Charles Scwab's microsite, schwabmoneyandmore.com, is indistinguishable from the rest of their Money Talks campaign -- bold graphics, common sense tone. According to their spokesperson, this is intentional. The new twist is a 'peer comparison' tool (right). Here's how it is described: "...a peer-comparison tool that helps users understand how their financial situations and monetary attitudes shape up against their peers. The site is intended to address the specific financial issues facing people 25-40. After users complete their answers and determine their mindset, they have a printable snapshot of their answers compared with the generation average. The printout also includes suggestions about how to improve their financial picture, which Can says appeals to the generation's "checklist mentality." "Checklist mentality?" My experience is that Gen Y is not accustomed to thinking of themselves in terms of checklists, and they don't necessarily care how they stack up to their peers. Better for Schwab to have provided tools that emphasized their 'unique' situations, rather than how they are just like everyone else. "Peers" is relatively undefined as people 25-40. What does a 25 year old recent grad have in common with a 35 year old middle manager with 2 kids? I am not really sure. B-. VW: VW also takes an interactive approach by polling site visitors to vw.com/whatthepeoplewant on 666,375 user submitted issues (who knew there were so many?!) such as "whether people like to take the soap and shampoo bottles from hotel rooms; ice cream cones versus cups". (Marketing Daily, 4/30). Results of course are shared. Here's how it's described in the LA Times: "By clicking onto the website, users are greeted by Max, a classic Beetle (well, KdF Wagen; it was never officially called a Beetle or a Bug) and the “new brand spokesman” [Gorgeous German accented Heidi Klum]. Max will invite them to vote yes or no on various pressing questions of the day and/or suggest polls themselves. They can see the results come up in real time. They can even go there, click that and buy the T-shirt displaying which poll was their idea. Cell phones may also be used to vote." We give the program a lot of credit for leveraging a range of new media, from banners to text messaging to t-shirts, even live polling through the giant multimedia board in Times Square. Fun? You bet! Millennial friendly? Very. Millennials want to participate and share with their peers. This allows them to connect in an interesting way. Now all they need is a Facebook application! A+