Soaring inflation is pushing the market into a competitive position and fueling recession fears. This week’s latest consumer price index shows a sore point Up 9.1% YoY in Juneled Treasury Secretary Janet Yellen to say that inflation in the US is “unacceptably high.”
Causes behind the steep jump include high commodity and energy prices due to supply shortages and Russia’s war in Ukraine, record government spending packages to stimulate the economy and low interest rates amid the Covid-19 pandemic, and continued labor shortages and demand-increasing supply chain issues.
But one investor is arguing that there is another major factor to blame: millennials.
Bill Smead, chief investment officer at Smead Capital Management, told CNBC: “Look, what people don’t include in the conversation is the real cause of inflation, which is too many people having too much money. chasing too few goods”. on Thursday.
Smead explains that there are an estimated 92 million millennials in the US, mostly between the ages of 27 and 42. “The last time we saw what we call ‘werewolf inflation’ – a type of inflation that is hard for policymakers to prevent – was when 75 million children boomed instead. 44 million people were the silent generation in the 1970s.”
“So in the United States we have a lot of people (ages 27 to 42) delaying buying a house, buying a car, about seven years later than most generations,” he said.
“But over the last two years they’ve all been partying together and this is just the beginning of a 10 to 12 year period where about 50% of people want these things more than the previous group. there. “
“So the Fed could tighten credit, but it won’t reduce the number of people who want these necessities compared to the previous group,” Smead said.
According to a Deloitte survey, burnout was cited as one of the top three reasons young workers quit their jobs in the past two years.
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Many millennials will disagree with the idea that they all have a lot of money and are now buying properties – according to several surveys conducted over the past two years, or more 60% of millennials are delaying buying a home due to student debt or the simple cost of the house relative to wages. This generation is also the generation that has fastest growing debt burden.
Even many of those with ample funds are holding back. As recently as June, the CNBC Millionaire Survey found that millennials “has the ability to cut purchases three times larger than their baby boomer counterparts.”
“Forty-four percent of millennials say higher rates have caused them to delay buying a new home, compared with just 6% of those who just had a baby. Nearly half of millennial millionaires said they are delaying car purchases because of higher rates — more than double the baby boom rate,” CNBC wrote.
Pressure on the housing market due to inventory shortages caused by the pandemic and high competition is also driving many potential buyers in their late 20s to early 40s.
Largest home buyer market by generation
Despite all this, millennials are still making up the largest share of the homebuyer market. They are also the largest generation in the US by population.
“Millennials now make up 43% of homebuyers – almost any generation – up from 37% last year,” said the National Association of Realtors found in its latest study released in March.
The NAR classifies people aged 23 to 31 as the “younger generation” and the 32- to 41-year-olds as the “older generation”.
“Eighty-one percent of Youth Millennials and 48 percent of Youth Millennials are first-time homebuyers, more than other age groups,” NAR wrote.
The study found that people from the younger generation are older than 25%, and the average age is 36. The next largest group is Gen Xers with 22% with an average age of 49.
“Some young people have used the pandemic to their financial advantage by paying off debt and cutting rent costs by moving in with their families. They are now diving headfirst into home ownership.” , said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. in the report.
The numbers still make many young people feel sad. According to rental website Apartment List, in 2020, 18% of millennials believe they will pay their rent forevergive up home ownership — almost double the 10.7% rate two years ago.
– CNBC’s Robert Frank contributed to this report.
