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Gen X. Gen Y. Risk Vs. Reward

I recently worked with a young couple, she 28 – he 35. They represent Generation X and Y respectively. They are risk averse and find it difficult to make decisions. I didn’t understand why until Ms. Buyer noted, “Michael, we’ve grown up only knowing bad real estate conditions.” Maybe there is more at play.

Gen X and Y buyers grew up in an age where risk was removed from their lives by Boomers. In addition, X’s and Y’s live in a world that spurns ownership in many other areas – movies are rented from Netflix, music provided free by Spotify or Pandora, and cars rented through Zip Car. In addition, they are growing up in a period of high student debt, marginal economic times, and in a period when good jobs and career advancement can be difficult.

Collectively, it became clear to me why deciding whether to own and what to own may be more difficult for Gen X and Y home buyers. As an aside, it is a benefit of my job that I get to learn about matters beyond real estate from these young home buyers.

An article by a Boston College economist, Alicia H. Munnell argues that more than half of Americans are saving too little to support an adequate lifestyle if they plan to retire at 65. From behavioral economics it is clear that when savings are put on automatic pilot – that is money set aside automatically and on a regular basis – people save. When people are asked to set aside money on their own, they do not.

Home ownership for me represents a forced method of saving. I was not a good saver until age 37 or thereabouts (ironically about the time I married), so from 27-37, I purchased real estate. I’ve written of how well the approach worked for me in past newsletters.

Since you need a place to live – discounting living with mom and dad forever – (they asked me to put that plug in) you have two choices: own or rent. If you own, you are in the forced savings mode. If you rent, you must count on setting money aside on your own. Behavioral economics says you won’t do that.

I acknowledge the experience of Gen X and Y buyers. The real estate market they know and our economic times cause concern. How might Homebuyer Associates help?

The best thing we can do is provide information to help you make informed choices – and not sell you a home. Otherwise you risk making no choice or a bad choice. There is much to cover. I’ll have more to say (surprise) on these topics in upcoming E-Notes.

Until then, I’m available for coffee if you want to meet to discuss your real estate questions. If you have a home to sell, we can discuss how to manage the sell/buy process (we’ll handle the buy part) or – if you just want to discuss whether or how to buy your first home, the cost remains the same – a cup of coffee. Thanks for reading.

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Homebuyer Associates
1835 N. Riverwalk Way
Milwaukee, WI 53212
Phone: 414-254-4129