Millennials, or those born from 1981 to 1996, have long been called the generation of slow starters. One example: A 2015 report from the U.S. Congress Joint Economic Committee was titled Millennials’ Slow Start Down the Road of Life. And as Bloomberg News wrote in June: “In almost every way measurable, millennials in the U.S. at 40 are doing worse financially than the generations that came before them.”
But during the pandemic, the generation that grew up during the Great Recession has briskly embraced homeownership, accounting for more than half of all home purchase loan applications in 2020. And with the U.S. residential market booming, millennials are also getting wealthier. As of June their net worth reached $7.5 trillion, 70% higher than two years ago, data compiled by the Federal Reserve show. Real estate accounts for just over a third of their assets.
But millennials still haven’t quite caught up on wealth creation. Their net worth accounts for only 5.6% of the U.S. total, according to the Fed. And with only 8% of assets in stocks, they didn’t benefit much from 2021’s rising market. By comparison, Generation X—the generation born before them, from 1965 to 1980—has amassed $38.5 trillion in net worth, up from $26 trillion two years earlier. Many baby boomers, who on average have about 30% of their assets in equities and mutual funds, have been able to retire early thanks to stock market gains. Total baby boom wealth, according to the Fed report, is $70 trillion.
Share of Assets by Generation
Q2 2021
Data: Federal Reserve
The problem for millennials is not poor money management: They just have a lot of bills to pay. Most significantly, many have enormous student loan debt. Also, down payments for their first home soak up a lot of cash that could have gone into an S&P 500 index fund. And given current trends in rent and home prices, many more millennials may feel compelled to buy.
Government data from the Bureau of Economic Analysis suggest that housing prices are still fairly tame—they increased a healthy but moderate 4.2% in October from a year earlier. But rents rose 12.6% in November from the previous year, according to online real estate agent Zillow Group Inc., which tracks new leases. Many millennials benefited from the real estate boom but missed out on 2021’s stock market gains. They are still the “slow starters.”