The CES: Tracking Generational Behavior

Welcome to part 2 of our Next Generation blog series. In this post we’ll share a little bit about the Consumer Expenditures survey, a survey that tracks the spending behaviors of consumer units across the U.S.

One of the more recent additions to the CES report is the inclusion of “expenditures by age of reference person,” which means how much different age groups spend in key consumer spending segments. Want to know how much 25-34 year-olds spend on cereals and bakery products? The CES data has you covered.

But you’re a credit union leader. You’re probably more interested in where these demographics spend money in categories like mortgages and cars. Again, the CES has you covered.

So what does the CES say? Let’s start with mortgages. Based on the headlines, you might assume that the 25-34s don’t own homes, but as we mentioned in part one of this series, the anecdotal data trends suggest otherwise. With regard to the CES specifically, this age range owns homes at a clip of 41%, with 33% leveraging mortgage loans.

Does your credit union offer mortgage loans? According to CES data, you could assume your marketplace for mortgage loans amongst 25-34 year-old members is roughly 33% of the total population. If you don’t have that much, then you’re missing out. Oh, and don’t forget about your under 25s. They own homes at a rate of 13% with 8% mortgaged.     

How about cars? Aren’t these young folks Uber-ing and Lyft-ing everywhere? Maybe, but 89% also own at least one vehicle according to the survey. Sounds like a market to me – as does the 66% of under 25s that own cars.

What’s our point here? Those that say the auto loan marketplace, or the mortgage marketplace, or any other marketplace for the next generation of members is dead may just be trying to convince you that it is – only so they can get the business for themselves. Something to think about.

Tom 

P.S: Want to grab a copy of the most recent CES generational survey data? Here is is.

The Next CU Generation: A New Series

The next generation of credit union members. Who are they? Carefree and unattached, never to own homes or drive their own cars? Hardly. They need. They want. In a series of posts we’ll share over the coming weeks we’ll explore a few of the unique trends shaping the next generation of credit union members. Our series will wrap up near the end of April with an analysis of the BLS’s release of the latest Consumer Expenditures Survey data. What’s that? Don’t worry. We’ll get to it.

In the meantime here is some food for thought… apparently the “exurbs” are back!

Oh, the exurbs! The magical lands that lay just beyond the edges of the suburbs and that offer hope, and peace, and community, and affordable housing. Or, perhaps put slightly differently:

Exurbs are where people can live in big, crappily built houses on the cheap, pretend to be rich yet shop at Walmart, while they spend 2 hours a day commuting to and from their highly mortgaged cribs. 

Thanks Urban Dictionary!

Well, regardless of how you want to define the edges of suburbia, the exurbs are apparently back and for good reason: those “never in a million years will they get a mortgage or own their own home” millennials (and apparently a good number of retirees), are looking for affordable places to purchase a home. And the exurbs are “where it’s at.”

The Wall Street Journal had a very good article in their March 26, 2019 edition trying to prove this point. Their analysis focused heavily on real estate development and mortgage activity on the outskirts of Phoenix. You’ll find the article here (subscription required): https://www.wsj.com/articles/a-decade-after-the-housing-bust-the-exurbs-are-back-11553610771    

A telling quote from the article, which both defines where we are headed in this article series and should also help you to stop your hyperventilating as you sit and relive the Great Recession, is offered by Jordan Rose, an attorney working in the real estate field in Phoenix. Ms. Rose says this:   

It feels like 2006 without the fake high at the end of the rainbow. There’s the same exuberance, but the buyer is real.

And as noted earlier, the buyers are quite often millennials. Another quote from the article:

In recent years, millennials have driven demand for rental apartments in downtown areas. Some in the industry thought this could be a permanent phenomenon. And yet, as they begin to marry and have children, millennials are proving like generations before them that they are willing to move to more affordable outlying areas. 

Honesty, this phenomenon should not be a surprise to anyone. Data, such as that offered up in resources like the Consumer Expenditure Survey, have shown younger generations to be in the market for home ownership, car ownership, etc. in ever-increasing numbers. The difference between them and earlier generations is simply one of timing. Recent generations were delayed in achieving certain life milestones (first job, marriage, family, etc.) because of the long-lasting effects of the recession. If we concede that point then we have to know that once life kicks in the demand for traditional lifecycle-oriented products will increase. It seems that is where we are now.

So, what is the Consumer Expenditure Survey (CES)? The CES provides data on expenditures, income, and demographic characteristics of consumers in the United States. Stay tuned for the next post where we’ll get into the CES data structures and explore a few of the spending trends that show up in CES data – and that paint a clearer picture of exactly what next-generation members are doing in the marketplace.

Until then,
Tom

PS: I won’t be the only one writing. GC’s new partner, Matt Griffiths, will be chiming in on this series and others. Matt has actually been around since late fall but we’ve been nose-to-the-grindstone since then and have not had a chance to do a proper introduction. We’ll take care of that shortly.

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Image by Devolk from Pixabay