Why aren’t young people buying cars and houses?

Tomorrow, Derek Thompson and Jordan Weissman from The Atlantic join us to discuss their article The Cheapest Generation.

The Millennials have been called “the screwed generation” by Newsweek. The Atlantic article could have taken a similar angle, arguing that poor Gen Y can’t afford to buy a house or car. Instead, Weissman and Thompson posit that maybe young adults just don’t want to spend money on those big-ticket items.

It’s highly possible that a perfect storm of economic and demographic factors–from high gas prices, to re-­urbanization, to stagnating wages, to new technologies enabling a different kind of consumption–has fundamentally changed the game for Millennials. The largest generation in American history might never spend as lavishly as its parents did–nor on the same things. Since the end of World War II, new cars and suburban houses have powered the world’s largest economy and propelled our most impressive recoveries. Millennials may have lost interest in both.

If you are a young adult, what do you think of the argument? Have you lost interest in buying a home or car?

-Stephanie Curtis, social media host

  • Leah Olm

    ABSOLUTELY. The entire economy crashed (and made it extraordinarily difficult for people our age to get jobs) because the generation above us spent more than they could afford- they bought everything on credit, sunk themselves into debt, and watched as their “investments” in houses became worthless.

    Why in the world would we make that same mistake? Especially when already overburdened by student loan debt?

    (On a side note, talk about mixed messages- “Don’t get yourselves into debt/debt is shameful” vs. “Our economy depends on your indebtedness/Why aren’t you buying outside of your means? You’re hurting the country”)

  • http://www.walkbikebus.com Michael Roden

    The article begins to get to the right point when it explores the fact that Millenials want to live in dense urban centers. I don’t identify so much with the smartphone-substitution argument. Smartphones are more of a necessity of the modern world, they are what we have known for most of our adult lives as an essential tool. Rather, what Millenials know is that we want to be closer to other people, and that we aren’t afraid of people different than ourselves – a bygone fear that led to the success of the suburbs and the freeway system. Density is far more efficient in every sense of the word, and our country will benefit immensely from the shift.

  • Jeff Mitchell

    I like Leah’s comments. In addition, universities beat auto makers and realtors to the punch in teaching young people their first big debt lesson. This goes back to before I graduated (waaay back in ’03). Students watched as universities raised their tuitions 10-15% each successive year, while adding zero value. That trend has only gone down moderately since.

  • Steve W.

    For myself personally and I believe this to be the same for many Millennials is that we didn’t see our parents as deriving happiness or self-worth from the best house/car/lawn lifestyle and we seek something a bit more intangible.

  • Julia

    I’ve never HAD interest in owning a car (not yet learned to drive). Car dependency is associated with decreased walking/health and increased costs/hassle. Growing up with the spectre of global warming and air quality warnings, and family stories about white flight, it never seemed like an ethical choice either. And having lost a number of family members to car accidents, the direct life-and-death consequences of cars weren’t lost on me.

    To live without a car in Minneapolis, I’ve chosen to live in very walkable areas on multiple transit lines near family/friends. I have an old lady cart that I use for larger grocery/shopping trips. And I see more and more of my peers trending towards the same lifestyle. About 1/3 of my friends don’t have cars, and another 1/3 park them for days at a time.

    In regards to housing, I’m not against owning a home, but it’s not a goal in and of itself. The density of single family homes doesn’t as easily support the carless/walkable life that I choose. Humans are social creatures and after having lived in both really positive roommate situations and extended family situations, it’s hard to buy into the idea that a house should have only two adults in it, especially during those cold Minnesota winter nights when one wants simultaneously to hunker down and to chat for hours.

  • Craigger

    What are they reading this summer? : )

    (and when can we expect an in depth show on what “young people” think about the marriage amendment on the ballot this fall? Since it’s clear this is probably the only way a LGBT topic might get covered in-depth on your program.)

  • Curt Benson

    Millennials are more frugal on non-big ticket items too. I’m a baby boomer with three children in their twenties. They all purchase items such as computers, furniture, baby stuff and appliances on craigslist and ebay.

    Craigslist and ebay make it extremely easy to find and purchase all kinds of used items. It was way harder in the past when one had to wade through miles of tiny type in the classified ads. Plus the newspaper ads were localized.

    We’ve learned from our children’s frugality too. We now look first to the used market on many items.

    Also, one can not stress enough how much wealth has been sequestered–and likely squandered–purchasing over priced educations that have not and will not lead to jobs that justify that expenditure.

  • Alfred

    I also agree with Leah. On top of that I am only 25 and I do not expect any type of social security when I grow up because a lot people that cant afford to have kids, other than welfare kids, are not having kids so there will be no one paying into the system. Also the economy is really tough now for college graduates so they maybe requiring more assistance in the future and the politics have to cater to them. To counter this, I have 35% of my income going to my 401k at work so I do not have much I can save and even less that I can spend. We need to learn to live within our means. I do not see any big ticket item in my near future

  • Anne

    Jeff is exactly right. Why would I saddle myself with a mortgage when I’m still paying off my undergraduate debt, and why buy a car when gas prices will only go up? Amongst my fears for the future, political polarization and social security definitely play a role. But the biggest fear? A life of crippling debt. I know that I will not be able to give my children the opportunities I was given, and that is reason enough to shy away from the big purchases.

  • Paul

    Its easy to find ways to transport yourself in the cities. I have a decent job but have chosen not to buy a car because i can bike (10 miles each way) to work every day. The greenway makes it possible! I can always borrow a friends car whenever I need to go on a serious trip.

  • MN

    I’ll buy a new car when they can figure out how to make them a LOT more fuel efficient. My 1997 Saturn gets 40 mpg highway – car companies clearly weren’t smart enough to invest in efficiency.

    I’m saving a lot of my money, but paying $425/mo. for college makes purchasing a house so far off, I don’t even want to think about it. I’d rather use my disposable income on travel and having a full social life.

    Plus, I’m single and 25. Why buy a house now, when I might want to move, and there is no one to buy it with?

  • Jeff Hall

    It seems that several people have already hit the nail on the head, in my view anyways. Many more people are going to college and becoming saddled with tens of thousands of dollars in debt. We can’t afford to buy new cars or homes because we’re indebted to the government and banks for the next 20 years of our life. I would love to buy a house and car, but it’s not economically feasible. There is a culture shift and an economic shift occurring. I would imagine that car and house ownership will shift from the 20s/30s to the late 30s/40s when we can actually get a decent job and begin to afford those things. The only people my age (around 28) buying houses are my friends who are a few engineers or who got lucky and found a high paying job out of college, but that is a very small minority. Additionally, many people in this age group are putting off having kids, why live in the suburbs, buy a car, and house when it’s just you and your dog and maybe a girlfriend/wife? It just doesn’t make sense. The ever increasing cost of college is going to continue to burden our entire economy unless something is done to make it more affordable.

  • Mike

    I think an underlying theme is openness to new methods and technologies. In the twin cities, it is easy to manage around this with public transit, walking, bicycles, hourcar, and light rail. You can’t do anything but stare at brake lights in a car – for people accustomed to constantly consuming media via phones, tablets, and computers, wifi or 4G on a bus or train lends far more productivity to the commute, at a lower cost than driving.

    Go outstate to Rochester, Duluth, St. Cloud, and it becomes much more difficult. Our midsize cities are built more like a large suburb than a small metropolis, and I don’t see the same shift among my friends that live in there. At some point, public policy in those cities may catch up to the change in people’s desires. I won’t hold my breath.

    It was disillusioning to see the SW light rail line passed on in the last budget cycle. Our elected officials could place Minnesota on the map with young professionals by more aggressively pursuing public transit.

  • Vince Christy

    I am 32 and a single father. I work fulltime ($10/hr) and have a daughter. I recently graduated from college with an AA and Medical Coding diploma. I took out loans to pay for my education. I can not get credit to buy a car or a house and it feels like these two items are far out of reach for me right now. I live with my parents because I can not even afford rent.

  • Jerry Stoner

    I have a significant amount of student loans, which definitely puts pressure on. There are plenty of nice houses to rent, so why own when you can rent?

    I don’t find value in an expensive car and prefer to drive a cheaper car I can work on myself. We live in Roseville and like the small compact feeling, but we also just choose to drive a lot less.

  • Christian

    I’m a Gen Xer in his early 40s. From my perspective the stereotype of Millenials is that they seem more inclined to nickel and dime themselves with the latest technical gadgets, designer coffees, cell phone/cable subscriptions etc. rather than invest in real estate.

    I remain a firm believer that owning ones own land / home is still far better than being at the mercy of a landlord’s whims (especially with regard to rural farmland).

  • Mike m

    Car. House. Jobs.

    When my father and his generation graduated from college in the 1970′s he was able to get a mortgage. And a car loan. And the 1973 porsche 914 he drove was ~$2500. And not over +1 year of income to purchase

    Now post college +10 years I have a house, a car, am married and dog cat and fenced in yard.

    Still can’t afford a new med size car and have to buy 4+ year old vehicle.

  • Nancy

    I followed the patterned described – and I was born in 1956. Most trends are curves, starting small in my cohort and growing.

  • Alissa

    What would happen if the fed gov would invest in college education rather than lower interest rates to invest in homes? If the fed gov made many more grants avail and lowered the cost of a college degree, would that make more money available to new graduates to spend, thus improving our economic growth?

  • Katie

    I’m 35 and I’m mostly looking to simplify our lives.

    Our transit here in Mpls/St. Paul is desperately lacking (but getting better). The only thing that makes me want a home is the potential to earn equity. I don’t look forward to repairs, re-roofing, putting in new windows, yardwork etc. Maybe it’s because I’ve worked 2 and 3 jobs for so long, I really value my “me time”.

    We have also put off the decision to get married and have children until we can decide what neighborhood we want to “settle” in.

    I also find myself looking for work within walking/biking distance because I HATE being in the car. On the train or buses I can read, eat, sleep, and be chauffered.

  • Tom Johnson

    I’m 23, living in Minneapolis and consider not owning a car a major factor in my quality of life. I know of no friends who treat it like a status symbol, it’s simply a tool for those who are not lucky enough to live a reasonable distance from work and culture. It’s healthier (mentally and physically) and faster.

  • http://thebuddinglotus.com Sherri

    I decided to take on immense amounts of student loan debt so that my husband and I could have the ability to afford my husband staying at home with our infant son. My masters degree allowed me to easily secure a job when I was even out of the country. We choose to make less money, have cars that are 10 and 20 years old, rent our home, and seek a high quality of life through experiences rather than things.

  • Jeremy

    There are a couple of factors that come into play, I think. With the unknowns associated with housing (my house lost $40K in 2 years), why would anyone want to roll the dice on that right now? That said, I do still think that owning a house is still a decent investment, but not what it seemed 10-15 years ago. However, another factor is that many 20-30 year-olds seem to really struggle with initiative and responsibility. That leads them to not getting good jobs, or even looking for them. A ton of my friends that have kids in that age range still have them living with them or have to help support them financially. I couldn’t have imagined doing that at that age. However, these kids don’t seem to give it a second thought.

  • Elisabeth

    I graduated from a 4-year college in ’09 and have been lucky enough to be one to see a return on that investment. I got a job with forward career mobility right out of school and could certainly afford to buy a house or new car. Instead, I live with three roommates and drive around in a reliable, used vehicle. Owning a home is not an ideal for me, the freedom to pick up and move anywhere or seize an opportunity that arises is far more appealing especially when the return on investment of owning a home is nothing like it once was.

  • Jennifer

    Home is where the heart is. Heart is with us wherever we go. Earth is our home. Hear the Heart of the Earth.

  • Devon

    Our parents had the “American Dream”, now we have the ensuing global lucid dream. There is more than the eye can see and hand can touch. Humanity is but a dreaming fetus about to be born. We are always home, we need but recognize the truth.

  • Temperance

    I’m waiting for when hemp can be grown in the United States. Hemp can be used to build our homes, clothe and feed our bodies, preserve our writings, fuel our cars etc …

    WHEN WE GROW, This is what we can do

  • David

    David from Minnetonka should have said this:

    I’m not buying a car because I can’t afford the 400-500 bucks a month for gas, the 150 bucks a month from insurance, the 350 payment a month for the car. That’s like 1000 bucks a month.

    So if you make 15 an hour that’s about 2400 a month before taxes or 1700 after 30% in taxes (we don’t all get that Mitt Romney 15% rate). So to spend over half of your check on a car isn’t going to happen.

    Food has gone up about double over the last 3 years. Gas goes up 1 dollar every year. Wages have been flat for over 30 years. The Fed Reserve keeps printing money to deal with our debit. The GOP congress won’t pass a tax bill to tax the richest who have more then ever before with the lowest taxes they’ve ever had in history in the US. With the low FED rates, I would be lucky to get 1.5% interest rate on a savings account. Inflation is over 4% so I loose 2.5% ever year in savings. I also have 150 a month payment for student loans. I won’t talk about the credit card debit I have from having 2 kids and paying for college on debit because I tried to focus on school.

    My parents had their retirement into the stock market and they lost have of their value when the bubble popped. Their house is now worth 1/3 less then it used to be.

    The only way I could ever get a house is with a FHA loan if I could ever pay off enough debit to get my credit score high enough to qualify and then save up the 3.5% down payment.

    I would love a house for my kids but the 1% won’t pay the rest of us enough to afford it and the corporations outsourced the jobs and the Republican congress won’t end their tax credits for outsourcing the jobs.

    There have been no job bills under the speaker of the house. There have been no big plans for the country to build anything nation wide like a bullet train or a space mining program. Our country spends all its money outside this country in wars and foreign aid.

    Until the country fixes the jobs, taxes, inflation, world policing, outsourcing, policy leadership the country will not change.

    I think will vote for Obama, but I hope others don’t blame him because Republicans haven’t passed any jobs bills to get this country turned around. I think the media has failed in highlighting and (sadly) educating he voters policy is MADE IN CONGRESS, the President just signs the bills.

  • Julie

    I wondered how my grandfather afforded a lake cabin, a nice bungalow and a car being a milkman/wife a house wife. My Father, a school custodian/Mom an RN, afforded a new suburban home, 4 children, boats and cars. I am 50, married to an uncredited Engineer (me + college degree and now stay at home Mom) and have a small family and will never afford what my parents or their parents afforded. I say, simplicity, economic modesty, college (with strategic degree) and working to build personal savings and retirement contribution is a must, especially if you plan to have a family later! Keep debt DOWN for freedom/flexibility. Live simple, maintain a good credit rating. After kids, NOTHING else so important for financial security. Buying a home at the lowest end in a good urban Minneapolis neighborhood (watch interest rate), working professionally with my own degree, delaying children, having contributed to a retirement plan and not touching it, plus continuing to live simply (one car, sometimes no car, 2nd hand clothes and no travel) and modestly saved us. We now are the privileged. Surprise!

  • Maggie O

    Great show. It was interesting, layered, had articulate guests and thoughtful comments from callers and people who posted. I’m 49 and witness this situation with my younger friends – although I was like this as well at that age (even without student debt). We do now own a house and 2 cars, but it was not for the sake of ownership – there were practicalities that determined the commitments. Would love to hear follow-up shows with some of the ideas that came up (the economy, carbon footprint etc.).

  • Amanda Keim-Morrison

    I’m 28 and graduated from college in 2006 without any debt. In late 2007, I used some of my savings to put a down payment on a condo in the metro Phoenix area. That experience soured me on home ownership — I’ve been unable to refinance and can’t get that condo off my hands without either ruining my credit or trying to sell it with the expectation of contributing a significant amount of money to cover the loan. I’ve lived in Minnesota for two years and still own that condo, which I rent out to a friend at price that doesn’t cover the monthly cost of my mortgage.

    My husband and I have made a conscious decision to live near our workplaces so we don’t have to drive much. We are fortunate to both have jobs that allow us to live an upper-middle class lifestyle, though we put most of our money into savings instead of spending it on stuff. But despite feeling financially secure, due to my and other friends’ experiences with home ownership, we are both perfectly content to live in a rental.

  • Bruce

    I live where I work, my transportation is by foot. After 2012 we shall know ourselves as one unity. Work/play, in/out, you/I, home/about, all an interplay of conscious. Soon we’ll be happily dreaming and blissfully awakening.

  • JEB

    Home ownership has been no picnic. I bought in 2006 straight out of college, and since then have lost big $ on the value. I work 2.5 jobs, don’t have time or money to do the upkeep I’d really like to do, and can’t sell without paying out of pocket to cover the balance of the mortgage. That makes it tough when a new job opportunity comes along and the commute is 4 times what your current one is, which hits you in the gas budget, so you pass because the extra expense makes the job offer a pay cut. Thank goodness we were lucky enough to refi this year.

    My husband’s and my dream is to shed the house in favor of something with less maintenance (condo, apt, teepee in the woods) so we can have more mobility if the need arises.

  • SB

    I’d buy a house if I could, but with a pretty much crushing amount of student debt (undergrad and grad) that’s not going to happen for at least 10 years. At least in the near to mid-term my education isn’t economically worth it. Hoping that changes in the long run. The out of control cost of education is going to be a drag on our economy for generations if we don’t address this.

    Instead of real investments in education and building an economy we’ve created a society where the middle is a hollow shell and casino capitalists get ever richer without paying even close to their fair share. We bailed out the banks, while ignoring the financial plight of individuals who are trying to get by.

    I have a 12 year old car that I share. It’s fine. I bike commute, and I’m happier for it. I’ll never buy a new car, there is not point in taking that kind of hit on upfront cost and depreciation for a little vanity. I’ve discovered a car doesn’t make my life better, if work allowed for it I’d go back to being car free and kick all of those costs.

    Am I cheap? Yes. It’s partially out of preferences and partially out of necessity. I also frankly feel pretty damn screwed by an education system that leaves you with a mortgage worth of debt and poor job prospects. We have an economic system where you can have a graduate degree and still only barely make a living wage, and you pay 25% of your income towards loans. I’ve saved, I have no consumer debt, I lead a frugal lifestyle and I’m still treading water.

  • Colleen

    I’m 24 years old and graduated with a 4-year degree in 2010. While I was in school, I did extracurriculars, always had a part-time job, and volunteered because I thought that would make my resume competitive when I graduated. I also applied for scholarships, went to a cheap public school and paid part of my way to minimize debt. Now almost three years and several jobs later I still can’t find full-time work in my field, and my part time job is barely paying the bills. I want to go to graduate school so I have a chance at a better job but I’m anxious about amassing more debt in an unsure job market. I see a car or house as a huge waste of money and I would rather pay my debt now and have these things later, when I have enough to pay them off instead of month-to-month.

  • Youngin

    Well how about you give us as young people a chance like real jobs be more lenient with loans and tell sallie Mae to stop raping us

  • Gaga21

    It’s a bit of both for me. I’m 23 and I personally am not that interested in a house right now, after seeing my mom (a single parent homeowner) telling us her house was her “nest egg” for so long, then in 2008 losing almost all the equity she has on it. She just wants to get rid of it now and says its “too much work” to be a homeowner as the house gets old and things need repair that she can’t afford and her kids move out. As for a car, I have one but I’d NEVER buy a new one. They depreciate as soon as they’re driven off the lot and I can find nice used cars with low miles for a decent price.

    On top of that, I have $50,000 in student loan debt that amounts to $600 a month in payments on those, plus rent, utilities, groceries, cell phone bill, car insurance, etc. and I’m still working the same low-paying $30k job I worked while in college and getting denied for every job I apply to making my $50,000 “investment” in my education being a terrible one so far. I don’t have any extra money to spend, and I have too much debt to finance anything “nice.”

    Half the people I know from high school and college are having trouble finding jobs, and these are smart, hard-working people. I do regret majoring in the social sciences, but I was told by my high school and college guidance counselors to “choose what I want to major in” and that “as long as I went to college and worked hard, everything will fall into place” for me and that “investments into education always pay off.” Yea, so far none of that has been true, but I need to go now and start getting ready for work!

  • http://www.wecansellyourcar.com.au/ John Stapleton

    Steady jobs are needed to support loans for these major purchases. I can’t see the numbers getting better unless the economy turns.

  • daniel

    I cant even afford new shoes, i dont drink dont drive dont do drugs, i work and work. Two jobs at a time on occasion. And live in an apartment with my girlfriend. Conservative on water, and rarely use Ac.. Not allowed food stamps, medicaid or anything that could help. And i save an average of 50-100 dollars a month. If it weren’t for her college financial aid and tax returns we’d be in a tent by now. So tell me what im doing wrong..