Many recent college grads and young business people are wary about making large purchases after entering adulthood in the deepest recession and weakest recovery since World War II. Confronting a jobless rate above 8% since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible.
As the Great Depression shaped the attitudes of a generation, so have the financial crisis and its aftermath affected the outlook of young consumers.
“This is a generation that is scared of commitment, wants to be light on their feet and needs to adjust to whatever happens,” said Zukin, who’s researched the effects of the recession on recent college graduates. “What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it.”
“Renting is something that is in play that wasn’t in play during the Great Depression,” he said. “To a modern generation, ownership isn’t about having it forever, it is about having it when you need to have it,” said Underhill, who has studied shopper behavior.
“Renting makes a lot of sense,” said David Blanchflower, professor of economics at Dartmouth College in New Hampshire and a Bloomberg Television contributing editor. “They have no money and they are not buying fridges and they are not buying the things they normally buy when they set up homes. Their incomes are a lot lower.”
40% of the 444 college graduates surveyed said their loan debt is causing them to delay major purchases such as a house or a car.
Even as the housing market shows some signs of revival, the slow pace of recovery is keeping the younger generation fearful of investments rather than confident about building wealth for the future, said Jeffrey Lubell, executive director for the Center for Housing Policy. First-time home buyers in 2011 accounted for the smallest percentage of the total since 2006. The vacancy rate of U.S. rental properties is at its lowest level since 2002.
Shifting attitudes about larger purchases aren’t the only reason preventing young consumers from buying. Stricter lending practices and higher requirements for down payments on houses and cars are crowding out buyers.
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Bloomberg Business Week