Investors Eye Millennial Rising in Housing
As the millennial generation ages, investors see big opportunity in the housing market as these young adults transition into parenthood. In fact, more fund managers reportedly are buying up companies that stand to benefit from this transition, such as home builders and mortgage lenders.
Read more: Suburbs Draw Millennials Wanting More Space
"A generation that’s been stereotyped as urban, single and aghast at the idea of a car-based life in the suburbs is starting to age, prompting fund managers to bet on companies that should benefit if the U.S. birth rate reverses a six-year slump," Reuters reports.
About 4.3 million millennials will turn 30 this year. By 2020, that number will jump to 4.6 million. That means more adults will soon be in their early 30s than at any other time in U.S. history, according to a Wells Fargo analysis of U.S. Census data.
"Look at what a 25-year-old single person spends money on, and look what a 35-year-old with kids spends money on," says Bill Smead, portfolio manager of the $1.1 billion Smead Value fund. "This is a chance to get rich on that transition." Smead’s portfolio holds homebuilder NVR Inc and mortgage lenders such as Wells Fargo & Co and Bank of America Corp.
Millennials already have become the largest segment of home buyers, according to the National Association of REALTORS®. millennials accounted for 32 percent of home sales in 2014, up four percentage points from two years earlier. What’s more, they’re buying up homes in the nearby suburbs rather than in urban cores.
"Especially in the older millennials, we're seeing a move towards more traditional patterns, just on a delayed time frame," says Sarah House, an economist at Wells Fargo.
Source: "As Millennials Reach Parenthood, Fund Managers Bet on ‘Burbs," Reuters (May 6, 2015)
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