Millennials Mired in Worth Gap as Older Americans Recoup Wealth - Bloomberg

Millennials Mired in Worth Gap as Older Americans Recoup Wealth - Bloomberg

The collapse in housing wealth accounted for about 40 percent of the shortfall in consumer spending between 2006 and 2009 relative to its previous trend, Princeton University’s Atif Mian found in a June 2013 paper. The current rebound in home prices won’t provide the same positive impact on spending it once did through what economists call the wealth effect, according to Mian.
“The types of homeowners that would normally spend out of their housing wealth are no longer homeowners,” Mian and the University of Chicago’s Amir Sufi wrote in a March 7 blog post. “The ‘housing as an ATM’ channel is not nearly as strong as it was from 2002 to 2006.”
Families headed by 25 to 44 year olds accounted for 35.3 percent of all consumer spending in 2012, according to data from Consumer Expenditure Survey. Those led by someone older than 65 accounted for 17.1 percent of all purchases.
“The fact that their wealth levels are down, that they’re less likely to own homes, that they’re not even comfortable setting up their own households as renters, that has consequences,” said Richard Fry, a researcher at Pew Charitable Trusts in Washington, referring to younger households. “They’re not buying cable packages, they’re not buying mops and brooms from Home Depot.”