Connect with us

Markets

The Wave of Millennial Home Buyers is Coming

Published

7 years ago

on

Every industry is trying to solve its own version of the “millennial riddle”.

The biggest demographic wave in history continues to crush everything in its path, leaving businesses and investors scrambling to adapt. First it hit retailers, restaurants, and media, but soon it will leave its mark on other established industries such as finance, healthcare, and real estate.

But the wave hits each sector in a different and unique way.

In the case of real estate, the millennial buying frenzy was already supposed to have kicked off – but it’s now on hold for a variety of reasons. We know that millennials still definitely want to buy homes, but the reality is that they are currently set back by challenges such as student loans, a low savings rate, and housing prices.

As a result of this unexpected lag, the home ownership rate in the United States has collapsed to record-tying low of just 62.9%.

Millennial Home Buyers are Coming, but Delayed

Today’s infographic from FirstTimeHomeFinancing shows the predicament that many millennials find themselves in: they believe that owning a home is tied to the American Dream, but lack the wherewithal to get into the market.

Millennial Home Buyers

A whopping 65.3% of millennials associate the American Dream with buying a home – more than any other generation. However, many millennials are not able to make home ownership a reality just yet.

Why the Wave is Delayed

Despite most millennials entering their twenties and early-thirties, home ownership is still a long way out for many of them. Almost one-third (33.2%) of millennials believe they are 3-5 years out from buying a home, while another 24.4% think that they are at least five years away.

Why are they waiting? The majority of potential millennial home buyers are strapped for cash with less than $1,000 in savings. Meanwhile, the average student loan balance is $37,173 per student, which makes taking out a mortgage more challenging and less responsible.

There are other factors, too. The median age for marriage is as at a record-high, and it’s harder to enter the real estate market these days. Credit standards have changed since the Financial Crisis as well, making it more difficult to get approval.

While this is all a little bit discouraging, we do know that 91% of millennials want to be eventual homeowners. When the timing is right to make that plunge, it will send ripples throughout the market.

Subscribe to Visual Capitalist
Related Topics:
Click for Comments

Technology

Just 20 Stocks Have Driven S&P 500 Returns So Far in 2023

From Apple to NVIDIA, megacap stocks are fueling S&P 500 returns. The majority of these firms are also investing heavily in AI.
green check mark icon Creator Program

Published

4 days ago

on

May 24, 2023

By

Just 20 Stocks Have Driven Most of S&P 500 Returns

Just 20 firms—mainly AI-related stocks—are propping up the S&P 500 and driving it into positive territory, signaling growing risk in the market.

The above graphic from Truman Du shows which stocks are making up the vast majority of S&P 500 returns amid AI market euphoria and broader market headwinds.

Big Tech Stock Rally

Tech and AI stocks have soared as ChatGPT became a household name in 2023.

The below table shows data from last month, highlighting that just a small collection of companies drove most of the action on the U.S. benchmark index.

Company RankNameContribution to S&P 500 ReturnAverage Weight
1Apple1.49%6.61%
2Microsoft1.15%5.72%
3NVIDIA 1.00%1.62%
4Meta0.66%1.15%
5Amazon0.51%2.56%
6Tesla0.50%1.39%
7Alphabet (Class A Shares)0.34%1.72%
8Alphabet (Class C Shares)0.31%1.53%
9Salesforce0.19%0.51%
10Advanced Micro Devices0.16%0.39%
11General Electric0.10%0.28%
12Visa0.10%1.08%
13Broadcom0.09%0.73%
14Intel0.09%0.35%
15Walt Disney0.08%0.55%
16Booking Holdings0.07%0.28%
17Exxon Mobil0.06%1.37%
18Netflix0.06%0.44%
19Oracle0.06%0.40%
20Adobe0.06%0.49%
Top 20 Companies7.05%29.17%
S&P 500*7.55%100.00%

*Based on the Vanguard S&P 500 ETF as of April 11, 2023. Source: Vanguard S&P500 ETF, Bloomberg.

Microsoft invested $10 billion into OpenAI, the creators of ChatGPT. It has also integrated generative AI into its search engine Bing. This large language model is designed specifically to make search capabilities faster, generate text, and perform other automations.

Also of interest is NVIDIA, which is the most valuable chipmaker in America. It sells $10,000 chips called A100s that allow machine learning models to run. These models perform multiple tasks simultaneously to develop neural networks and train AI systems, including OpenAI’s ChatGPT. Companies that are developing AI-related services, such as chatbots or image generation, may use up to thousands of these chips.

Despite being the world’s most valuable company and a key driver of returns, Apple is an outlier among tech giants with no major projects announced in AI (so far).

Implications of Market Divergence

The problem with the strong gains seen in a few select AI-related stocks is that it clouds wider stock market performance.

Without the AI-led rally, the S&P 500 would be returning -1.4%. as of May 17, 2023.

This form of steep divergence, known as market breadth, often signals higher risk in the market.

When more companies experience positive returns it is less risky than a small handful seeing the majority of the gains. Today market breadth is very narrow, and these companies make up over 29% of the entire index’s market capitalization.

How long AI-related firms mask the broader performance of the S&P 500 remains to be seen. A growing number of market pressures, from higher interest rates to banking uncertainty could add further challenges.

Continue Reading

Subscribe

Popular