When it comes to trying to get inside the head of millennials, don't buy the buzz about the "don't own" economy.
The success of start-ups like Netflix, Spotify and Uber have led to predictions that future Americans will choose not to own and drastically shape the future consumer society. But when it comes to big purchases — the kind that can be very good or very bad financial decisions — millennnials are not that different than past generations.
Fifty-three percent of millennials own homes and overall, 88 percent of millennials who do not own a home have one on their wish list, according to a survey conducted by Qualtrics, a Provo, Utah-based survey software firm, and venture capital firm Accel Partners (a Qualtrics investor).
"The sharing economy is here to stay and has changed how many people work and live. But it doesn't mean that traditional purchases such as cars and homes are less enticing to millennials," said Mike Maughan, head of brand growth and global insights at Qualtrics — and a millennial himself.
Nearly 80 percent of millennials own cars and 75 percent of millennials who don't own a car aspire to own one now, the Accel + Qualtrics Millennial Study 2017 found.
"The world is changing, but in some areas maybe not as much as we think," Maughan said. "They're not afraid to put down roots," he said. He noted that the number of millennials who aspire to own homes holds steady whether they live in metropolitan or rural areas.
Maughan said the data is even more important now as millennials enter their peak spending years.
Homes, guns, Siracha sauce: What millennials purchase
- Smartphones: 98 percent
- Energy drinks: 64 percent
- Organic food: 54 percent
- A home: 53 percent
- Any item over $2,000: 40 percent
- Tattoos: 40 percent
- Musical instrument: 38 percent
- Firearm: 26 percent
- Siracha sauce: 16 percent
(Source: Accel + Qualtrics Millennial Study 2017 )
Millennials may be a transitional generation when it comes to consumer preferences, but busting the myths of the "Don't Own" economy is an important part of ensuring that financial decisions made today by millennials are the best ones for their future.
Sophia Bera, founder of Gen Y Planning and a member of the CNBC Digital Financial Advisor Council, said she sees evidence that millennials are truly transitional when it comes to views on home ownership.
"I am noticing more millennials buy or rent depending on area they are in, seeing people go from renting to buying to selling and renting again to buying again, as opposed to buying and hold that property for decades," Bera said.
In one way, home ownership is working out well alongside millennial generation developments. "They are much more likely to become landlords, buying with the ability to rent it out or 'Airbnb it,' Bera said.
The financial advisor also sees great potential downside to home ownership as a default consumer position, stemming from a core millennial need greater than ownership — mobility.
Millennials should weigh before buying a home whether they may be interested in a job change and move across the country. And when a millennial follows through on a career move, Bera recommends renting for a while before deciding where to buy again. "There is a higher value in mobility and if that is case, I try to talk them out of buying too soon," she said.
Bera is also concerned about pressure being brought to bear on millennials from their parents' generation, leading them to buy a home for the wrong reasons — someone else's reasons. "I would say there is lots of family pressure that when you get a good job you are supposed to buy a house," she said.
Long-held beliefs about the value of home ownership is no reason to buy a home now. Nor is a focus on current low mortgage rates compelling on its own. "What's going on in your personal economy is more important than the actual economy," Bera said.
Bera said before buying a home millennials should consider the following personal finance milestones:
- Have you saved for a down payment?
- Do you have an emergency fund?
- Do you plan to be in the area for five years?
- How much home do you want to buy, need to buy and can afford to buy?
- How will you balance a mortgage with retirement savings contributions?
- How will you balance a mortgage with existing debt payments?
Bera recommends aggressively paying off student debt before buying a home. "It's hard to have a lot of financial obligations and a mortgage is a big one. ... Pay off a car or student loans before buying so you have less monthly obligations," she said.
