The Boomerang Generation… heard of it? They’re the kids that move back with their parents after branching out on their own only to find the costs of independence exceed their income production. LA Times, writer Don Lee wrote an article today discussing the long term effects on our young twenty-something’s being unemployed or underemployed, moving back with parents and the potential for fundamental cataclysmic changes in their economic behavior as a result. This is an interesting premise and one that many of us actually witnessed growing up. For me, being born in 1961, the last year of the Baby Boom Generation, gave me the unique experience of seeing post war prosperity and the lingering effects of the Great Depression. I recall my grandfather’s conservative nature; his philanthropic generosity, but also his fierce saving for fear of losing everything again. Lee’s hypothesis suggests that the effects of the Great Recession will be long lasting and will have an impact on our economy, housing and even family creation for years to come.
The argument is like this: young people who can’t find work or can’t find high paying work like previous generations, are “Boomeranging” back to their parent’s home, delaying marriage based on economics and even starting families out of wedlock, and as a result, creating more families in poverty. The inference is that, these people are the consumers that we need to lead us out of the recession and they are not spending; that we need them to spend to jump start the economy and even the housing market. This is where I step in and say, “whoa, now your speaking my language”: housing.
While the impact of this may be slower jumps into home ownership and household creation, this generation is saving more than any since my grandfather’s; 8% of their income reportedly. This can only help the long term health of the housing industry. After all, didn’t we just learn the importance of not lending to the “no down, no savings” buyer and the problems of over leveraging? Further, we cannot, underestimate the power of the aging Baby Boomers. Here the thinking runs both ways against the middle. Some argue that as this consuming generation ages, they will reduce their spending, putting us into a deflationary downward spiral. This would be further complicated if today’s generation is saving and not spending. However, there is another school of thought, and one in which I find myself firmly a believer in, and that is, as the Boomers age and eventually die off, their vast wealth will be passed on to this younger generation and they in turn will begin spending and spending big time. This should create a tidal wave of consumption and an ever increasing demand for housing. One might even argue specifically for luxury housing and secondary homes.
In the end, I suppose the scarring of the Great Recession will be far reaching, but I am optimistic that the lessons learned will propel us, rather than drag us down. Like the old saying goes, “That which doesn’t kill us, makes us stronger.”