Saturday, April 30, 2011

Oph Topik: Has Housing Hit the Bottom?

Each Saturday the Echo Boom Bomb features a post impertinent to Echo Boomers.

Short answer: No.

In order for housing prices to rise, a few things would need to occur first:

1. Energy and food prices need to drop by large margins. Unless new technology is quickly developed, or Americans quickly adapt to higher prices, these high necessary costs will crunch American's wallets and make them reluctant to put down roots for a home. Add to that fact that many Americans worry that oil prices may climb as high as $5 or $6 a gallon. Do you think these people will buy homes if they expect future prices to be higher?

2. 72 million Echo Boomers need a much better financial standing.

3. A calm financial perspective shows up for people. Uncertainty is driving the market now: the price of gold and silver are moving up, not because they're worth a lot of money, but because some people are losing faith in fiat currencies. This, however, is driving even more uncertainty in the market and feeding the viscious cycle.

4. The Federal Reserve stops acting like capricious monkeys. Frankly, high oil and food prices can be thanked due to QEII. But here's the bad news for Americans thinking about buying a home: the Federal Reserve is considering QEIII. The question is just how high will gas and food be next year? Or the next year? The Federal Reserve is contributing to the uncertainty in the market.

5. Politicians find a budget plan that works. It doesn't matter which of the parties you like, all the budget plans are disasters. But these disastrous plans feed into the uncertainty. How can people prepare for their financial future when they don't know if their country will remain solvent in ten or twenty years?

I see none of those things happening any time soon; though only 2 or 3 need to occur in order to see housing prices begin to climb. However, if those five things continue, I expect housing prices to either stagnate or fall a little further.

Now, let's suppose you're an opportunist. If you plan to rent homes, now would be a good time to buy as many Echo Boomers will be renters. In the long run, you may even be able to sell some of those homes.

Thursday, April 28, 2011

Some Economic Stories

I just spoke with an individual, who told quite a scary story for her area:

Our area has had so much trouble they've laid off a huge number of the teachers. Next week they will be charging people in the area per child for a bus ride. And when you have a few kids, that's another financial worry.

Of course, another individual had some great news:
Gosh, our unemployment rate is lower than 2%. In fact, I think that we have one of the lowest unemployment rates in the nation. But you're right, part of that is because agriculture is booming and we have a ton of it here.
Remember that although interesting, anecdotes may or may not reflect an accurate picture of the United States as a whole. Quite a few school districts are cutting their budget, but in some places in the United States, states are doing quite well.

How Much Money Do Echo Boomers Make?

If you read the post Who are the Echo Boomers, you might have been confused on two separate items: Millennial median household income is $58,620 while Millennial median individual income is $22,000. Obviously the word household is what distinguishes the two - in one case you may have two people, in the other case you only have one.

1. Timing is everything. The second study observed that Millennial median income had fallen from $30,000 a year to $22,000 a year from 2009 to 2010. The first study only observed 2008. Post recession, almost a third of Echo Boomers don't have jobs, which will play into low income figures.

2. Marriage matters. Household income should be higher than individual income because a household can have more wage earners than one. If two married people each make $44,000 a year, the household income would be $88,000 a year while the individual income would be $44,000 a year.

Important side note: When media sources lie (neither of these did), they often lie by using the word "household." For instance, they will claim that "household income in the United States has been decreasing for three decades" without telling you that households in the United States have been decreasing in wage earners in the last three decades (ie: the rise of single parents).

Wednesday, April 27, 2011

Do Echo Boomers Fear China?

A blog post discussed a recent Brooking's study about Echo Boomers and their views on countries as allies or problems. When it comes to China, Echo Boomers differ from former U.S. generations as more Echo Boomers tend to see China as a potential problem. Of course, this study failed to clarify how Echo Boomers saw China.

As an example of this, Echo Boomers grew up in a world where jobs were being exported to China to capitalize on cheap labor. The U.S. lost manufacturing jobs, which have historically paid well, while China made major gains. In the past thirty years, China's trade surplus has grown while the U.S.'s trade surplus has increased. Echo Boomers may see China as a threat only in the sense of economics, not in terms of military.

As an additional note, many Echo Boomers think that China will be the most powerful country by 2025. If you spend any time at all reading online news, you will know that this view is prevalent throughout U.S. media. While I don't doubt that China will become the dominant power, it should be of note that for a generation that reads a lot of online news, this view is not surprising.

I think that Echo Boomers' views on China as a potential problem (mostly from an economic standpoint) will encourage them to vote and fight for policies which favor domestic production over foreign production. We may be seeing the end of the view that globalism is a good thing, as Echo Boomers - who are experiencing high rates of unemployment - see China as an economic threat.

Tuesday, April 26, 2011

Generation Y Housing Update

Last week I wrote Do Echo Boomers Just Own Or Rent, which questioned whether other options for housing existed for Echo Boomers. I've compiled some data from this year which offers three options now: own, rent and relatives. The new relatives category includes an Echo Boomer living with either friends or relatives.

It should be of note that the original data are demarcated by gender, as I intend to break down the study by gender and age. However, for this blog, I have combined the data which is spread throughout this blog. For now, the following housing data are separated by gender, so that you can see some trends.

The only slight odd part about the above data is that males tend to own more homes than females, yet females report wanting to buy homes by double what males report. I expect this trend to change. When Echo Boomers are in the age range of 28-41 (ten years from now), there will be probably be double to triple the amount of female homeowners as male homeowners. I briefly hit on this in Will Low Marriage Rates Sap Future Housing Demand?

Monday, April 25, 2011

Will Marriage Become A Minority?

Will Fewer Echo Boomers Marry Than Not Marry?

According to a Pew (click Marital Status) study only 21% of Echo Boomers are married as of 2009. I am currently in a 31 day study of counting married Echo Boomers I speak with (right now, the average is at 22% among the ages of 18-31). While marriage, as an institution, will never end, I expect that the United States will experience record low marriage rates among the Millennial generation for a few reasons.

1. If you look at the age group I'm dealing with (18-31), you'll notice that there are 6 years above 25 within that group, and 7 years below 25. Both my current numbers and the Pew study state that only 21% of Echo Boomers are married with my study narrowing the age range. Even if marriage rates tripled among this generation that would only mean that 63-66% of Echo Boomers would be married. That would mean that 37-34% of Echo Boomers would never marry. From the GSS data that I can recall in college, in former generations, about 20-25% of former generations never married. In other words, even if marriage rates triple, the Millennial generation would still possess the most never married group of members in U.S. history.

2. Obviously, Echo Boomers have witnessed divorce more than former generations, and might be reluctant to marry. While I avoid topics like this with customers, I've heard many Echo Boomers express concern about divorce as a reason to avoid marriage. The main reason to avoid marriage that Echo Boomers list, however, is financial concerns, but divorce can quickly change a person's financial standing.

3. The Millennial generation has more single parents than former generations, and this will encumber marriage consideration. Notice that in this study some Echo Boomers have delayed marriage consideration due to the economic conditions. Obviously, finances are a concern for many Echo Boomers, and marrying someone, who already has kids will add to a person's economic stress.

None of this is illogical; obviously children are more expensive in terms of finances and time than some homes are, so avoiding marriage in these situations can alleviate or prevent financial stress. Echo Boomers, unlike their parents, are inheriting a country with a massive amount of debt and a significant amount of economic uncertainty.

Here's what I expect for the future of marriage rates in the United States:

The United States will look more like Europe and Japan in the Millennial generation; low marriage rates and changing economic demand. Remember, this is not a negative economic event! In fact, some successful future companies will succeed by finding products and services that these singles will want. For an example of this, if the United States mirrors Japan, some trends Japan is seeing among its young men may be products that can appeal to these single Echo Boomers in the United States (or a current example in the U.S. already: the fitness industry tends to appeal to single Echo Boomers over married Echo Boomers).

In conclusion, even if marriage becomes a minority among Echo Boomers (a dubious theory for now), we'll see adjustments within our economy. I would expect some media sources (like the Japanese article) to bemoan these changes as bad or harmful to our economy.

Baltimore Sun Blog Post

A fantastic blog written by Jaime Smith Hopkins, The Real Estate Wonk, published my post about selling real estate to Echo Boomers ('Echo Boomers' have a different outlook on homeownership). The blog, which covers real estate in the Baltimore area, does a fantastic job of covering the issues. In fact, she wrote an excellent post about Echo Boomers and real estate in March.

Sadly, some real estate blogs only highlight homeownership, but Jaime Smith Hopkins provides excellent coverage of renting as well - something which Echo Boomers, like myself, highly appreciate. Definitely check out her blog!

Saturday, April 23, 2011

Oph Topik: Should Americans "Shun" Some Media Outlets

Each Saturday the Echo Boom Bomb features a post impertinent to Echo Boomers.

According to Bloomberg, many Americans are avoiding homeownership even though housing prices remain at historic lows. While I would recommend that everyone read it as an example of poor journalism, I want to focus on some banal points that some media outlets - such as this article - make when writing articles about homeownership.

1. Some media outlets love to write something about homeownership and the American dream. Frankly, homeownership has never been the American dream or even part of it. In the past, starting your own business, seizing an opportunity, or leaving your future children better off than you were the American dream. Why do media sources in today's culture always write about homeownership being a part of the American dream?

Do Americans really lack a creative vision for their life that some media outlets love to portray? Of course not; many Americans have a multitude of dreams that have nothing to do with homeownership.

2. Some media outlets love to ignore the obvious. Notice how the article discusses the skepticism of Americans wondering if they should rent or buy. If you read the article, you might think that what concerns most Americans are (1) their home retains its value, (2) they are able to sell their home if they lose their job, (3) future job certainty.

While those are valid concerns, most Americans tell me day after day that gas and food prices are completely encumbering them from buying homes. Who can afford to buy a home if the price of gas may go up another dollar or two? And remember rising gas and food prices will have effects on other parts of the economy.

3. Homeownership is NOT always a better option. There are a multitude of circumstances where owning a home is inferior to renting a home - job uncertainty, a desire to wander, rapidly rising prices, a desire for more education, living with new people, et cetera. Yet notice how this article (and others like it) approach the situation as if homeownership is the default and best option ... always. Homeownership is not always an investment because it doesn't always make sense for people.

Understand your circumstances and ask if homeownership makes sense for you (and if it does, buy; and if does not, rent). Otherwise, it won't be the end of the economy or America if many Americans rent and stop owning.

Friday, April 22, 2011

"Should I Rent or Buy?"

Each Friday, The Echo Boom Bomb will feature a common question among Echo Boomers and/or their parents concerning economics or finance concerning the Millennial generation. These questions are often asked by Echo Boomers and/or their parents that I survey or can be directed to my email at echoboombomb [at] gmail [dot] com. If you email a question, please be sure to keep it concise and direct.

Question: I am about to move out of my parent's house, and have been told by many people that renting is "throwing money away," so I'm wondering if I should buy a home?

Buying a home is a great option if three of the four contingencies (and if all do, even better) apply to you:

1. You plan to live in your area for a long time.
2. You work at a safe job that's immune from economic problems (for instance, the medical industry).
3. You want a specific home and you have no thought of selling it later.
4. You love buying and selling real estate, so when you take a loss, you can't imagine doing anything else.

In all four cases, buying a home is a great option. However, if none of those apply to you, for instance, if you plan to leave your city in a couple of months or years, I would avoid buying a home.

As far as the idiom, "Renting is throwing money away," remember that a person never recovers their property taxes, homeowner's insurance, interest payments to their mortgage, and time spent maintaining their home either. Renting provides you with a significant amount of freedom and flexibility, and if you value those, then renting is not throwing money away.

Thursday, April 21, 2011

Do Echo Boomers Just Own Or Rent?

New Option To Be Added This Year To the Millennial Financial Data

I dislike the rent vs. own portion of my study because many of the Echo Boomers I speak with do not own or rent. After six months of collecting and compiling data, I began to realize that I left out an important category: living with relatives or friends.

While I am unable predict the exact results, I can state that around 2-4 Echo Boomers live with their parents for every one Echo Boomer who owns a home.

According to a recent study, many Echo Boomers move back with their parents. While this act may have been stigmatized in former generations, among Echo Boomers, moving in with relatives or friends makes economic sense. Based on the Echo Boomers who live with their relatives, I see three major reasons why this option makes good financial sense.

1. Service salaries don't cut it. Many Echo Boomers fail to bring in median income (around $50,000) and lack the financial power of others. If their income is low, they can adjust their living expectations to increase other options. Most Echo Boomers, who live with their parents, do not pay rent. This helps them save either for a home, or helps them hold out until a decent job and salary come along.

As an added note to this point, many Echo Boomers, who rent, share their apartment or homes with multiple roommates (beyond the trite 2 roommate per household). This indicates that many Echo Boomers are trying to save any little income they can.

2. The recession is encumbering them from finding good jobs. Many Echo Boomers have moved back home because the economy isn't offering them jobs in areas they would like to live. Most Echo Boomers living with their parents admit they would like to live on their own, but the recession has kept jobs from opening up in areas they would like to live. A lack of jobs not only encumbers their income, but restricts where they can live.

3. Food and gas prices are pinching their wallet. Echo Boomers will lack the homeownership power of former generations as long as gas and food prices continue to remain high. If you're losing more money every year from rising prices, you must save in other areas. Many Echo Boomers are choosing to save their money based on where they live, and living with relatives seems to be their favorite option.

Wednesday, April 20, 2011

How Do Echo Boomers Think?

According to a few studies, one by Brookings and one one by Pew, Echo Boomers hold views that are quite different than some previous American generations. Echo Boomers constitute the next major generation of American leaders, and will influence the political spectrum as they mature. Some of the highlights of Echo Boomers' views from the study:

  1. Unlike former American generations, Echo Boomers favor isolationist policies. Keep in mind that this generation has been influenced by the U.S. government spending careless amounts of money overseas, while the U.S. has experienced major trouble in our own society. Echo Boomers may be thinking, "Why help others if we can't even help ourselves?"
  2. Echo Boomers use online media sources for their news more than any other form.
  3. Approximately 38% of Echo Boomers identify themselves as Democrat, 26% identify themselves as Republican, and 29% identify themselves as Independent.
  4. Among all different political views, Echo Boomers are influenced most by their parents. It should also be of note here that many Echo Boomers have formed political and economic views based on what happened to their parents (outsourcing, Enron, et cetera).
  5. Echo Boomers, unlike Generation Xers, favor government jobs and opportunities.
  6. Echo Boomers respect energy companies the least, while respecting IT and consumer goods companies the most. When you consider Google and Apple, this should come as no surprise as technology demarcates Echo Boomers from other generations in terms of use. Also, companies like BP and Enron have failed to earn respect due to poor corporate thinking and approach.
  7. Echo Boomers favor more government than former American generations.

Tuesday, April 19, 2011

Can Echo Boomers Survive the Recession?

Since the recession began, young Echo Boomers have been hurt more than any other American demographic. While the implications may not be immediately obvious, when you evaluate the Millennial financial data, you'll notice that this generation lacks resources in general. Without a job, some Echo Boomers will look to start their own business, but some may sit it out and not work.

This past recession (and potential one coming) will define Echo Boomers. Although Echo Boomers have a tendency to be educated, in many cases, they still have experienced trouble finding jobs. I've spoken with multiple Echo Boomers, who have college degrees, but are working in retail jobs with the pay slightly above minimum wage. As one Echo Boomer stated, "I'm not making enough money to pay off my student loans yet, and I'm not sure that graduate school is an option when I think of taking on more debt." As a pertinent side note: the education bubble will pop when students realize that their return on investment in education won't pay their student loans.

Approximately 35-45% of Echo Boomers I speak to on a daily basis are either unemployed, working part time, or working at a job that pays minimum wage or slightly above minimum wage. These factors mean a lot for their future economic standing: without a decent income, their current loans balances will take longer to pay off; there will be a significant time frame before they can buy homes; they will experience a lot of trouble when applying for any credit.

However, most Echo Boomers are still optimistic. As economic factors continue to affect Echo Boomers, we will see if their optimism is well-placed.

Monday, April 18, 2011

Generation Y Is How BIG?

According to a CBS news video, Echo Boomers (sometimes called Generation Y or Millennials) are the largest American generation since 1960. If you include Echo Boomers born from 1982 to 1995, there are roughly 80 million total. For reference and consistent date sake, Echo Boomer by my definition means a young person born between 1980 and 1995. This would mean that there's more than 80 million.

When I worked in the financial industry, approximately 25-30% of my calls were Echo Boomers. While this had been trending upward for the last two years, some of these Echo Boomers were excluded because they're too young (1993, 1994, 1995). As this generation matures, I expect that a third of financial customers will be Echo Boomers. From a business perspective, not only is this exciting news, but it also means that unaware companies, which fail to market well to Echo Boomers, will easily fall to companies, which have prepared for this massive demographic.

An example of this generation's size affecting business would be the housing market. A generation with over 80 million members may mean a generation that eventually will need more housing units (and depending on the Millennial marriage rate, the demand may be higher because fewer Echo Boomers will marry).

As a final note, notice that there is some disagreement as to when the Millennial generation begins. Even with the disagreement, however, the estimates are about 80 million (close to one-fourth of the U.S. population). An example for investors or traders, would be Generation Y's affect on oil prices, as more Echo Boomers, who drive, will cause the price of oil to rise in the long run (unless alternatives are developed within the car market that do not use oil).

Saturday, April 16, 2011

Oph Topik: Will Gas Prices End the Economic Recovery?

Each Saturday the Echo Boom Bomb features a post impertinent to Echo Boomers.

Customer concerns over gas prices have become frequent over the last few months, and many of the statements I am currently hearing, I heard back in 2008. The United States cannot endure high gas prices because it was built with the assumption of cheap oil. Unless an alternative energy source becomes the ubiquitous way in which Americans travel, high oil prices will encumber any future American success.

At this current time, however, I am not sure if oil prices can continue to stay high. There are three major risk factors, which are contributing to high oil prices:

1. Libya conflict
2. Current demand
3. Inflation expectations

I want to point out that as far as #2 is concerned, I am still amazed how many people drive and want to buy SUVs, which receive poor gas mileage. You would think that Americans learned from the last $4 a gallon debacle, but apparently, many of them have not.

Of the three, the last one worries me more than the other two. If the Federal Reserve fails to see a solid recovery, they'll try QEIII, which will only push up the price of oil. Frankly, QEII hasn't helped oil prices - it has helped weaken the dollar though, increasing the price of energy and food.

As far as the future is concerned, it is impossible to know what it holds. However, as time moves on, watch those three issues closely, and you'll be able to determine how to adjust your wallet accordingly. If you can, now is the time to buy a vehicle that uses alternative energy, like natural gas or electricity.

Thursday, April 14, 2011

Echo Boomers Try Entrepreneurship

A recent article highlights that Echo Boomers are pursuing entrepreneurship:

This generation of young workers are abandoning their corporate jobs to become their own boss and tapping into social media to earn money, a new report has found.
While I wouldn't stretch so far as to say they are "abandoning their corporate jobs," I concur that many young people are using social media as a way to try a start-up.

As examples of this, I've spoken with a few Echo Boomers, who successfully started a company. One Echo Boomer managed to start a business in men's fashion even though he was an electrical engineer. He told me several times in the call that without social media he would have failed in his goal. Another Echo Boomer tried multiple times using social media, but failed to generate revenue.

It seems, however, that networks like Facebok or others may offer a starting point for Echo Boomers to test their ideas.

Wednesday, April 13, 2011

"No Houses Please. We're Echo Boomers."

3 Reasons Why We Won't See A Demand For Housing Among Echo Boomers For a While

"I want to buy a home in the next five years or so, but honestly man, I don't know how I'm going to do it. I just don't make that much money." ~ One out of many Echo Boomers who've said similar statements

Housing prices fell, so it's a good time to buy, right? Not if you're an Echo Boomer. For all the articles about Echo Boomers being one of the largest generations in American history (some saying the largest, some saying the second largest), this generation lacks the financial power it will take to buy a home. Add to that encumbrance the fact that some Echo Boomers don't want to buy a home; wanderlust has more appeal to these Echo Boomers. We may see a housing recovery in the next few years, or we may not. However, one thing is certain: at this present time, Echo Boomers won't be driving the housing recovery.

1: Echo Boomers have light wallets.

Suppose that half of Echo Boomers wanted to buy a home tomorrow, and put in an application. How many of them would be approved? In the traditional sense, not even 10%, but if some managed an FHA loan where they had to put a minimum down, we might see more homeowners - though, there would be more problems if that occurred.

Before dealing with non-traditional loans, let's review how prepared Echo Boomers are for a traditional down payment of 10-20% on a mortgage. The below graph is the financial distribution of Echo Boomers with a red line showing a rough estimate of how much Echo Boomers would need in assets for a small down payment. On this graph, I used $15,000 as a minimum amount - which keep in mind, would only be a 20% down payment for a $75,000 home. But we don't expect Echo Boomers to buy $200,000 homes yet, right?

The biggest problem with the above graph? In many areas, a $75,000 home would be an excellent deal - many Echo Boomers will need much more than $15,000 for their first home.

Of course, the most obvious rebuttal I hear is that Echo Boomers could try other loans, like an FHA loan where they could put down less than 5%. The trouble with this logic is that it fails to consider any financial emergency after Echo Boomers buy a home. As we can see from the above graph, few Echo Boomers are prepared to buy a home, and in many cases, they would be stretching their net worth to buy a home. What would happen in a financial emergency? A Millennial housing boom might quickly turn into a housing bust with so many Echo Boomers walking below and on the line.

Remember the following data:

90% of Echo Boomers have fewer than $1,500. Does that sound like a massive generation waiting to buy a home? One financial emergency, and they would be exiting their mortgage. By contrast, 20-25% of foreign Echo Boomers look like they're ready to buy homes, only there are fewer of them. Add to that the fact that many foreign Echo Boomers live in the United States for education only, and plan to return to their homeland when they are finished (as a general trend, most Indian and Chinese students tell me that they intend to return to India or China when they complete their college degree).

My major take-away point here is that Echo Boomers lack the financial power to buy homes. Things may change in the future, but for now, we shouldn't expect to see them rushing to buy homes. If they do without building assets first, based on the above data, we may see a terrible bust shortly thereafter.

2: Do Echo Boomers want homes?

"Why would I ever buy a home? You can say that renting is 'throwing money away,' but you'll never get all the money you paid in maintenance back, so ..." ~ One of the many skeptical Echo Boomers about homeownership

A real estate agent's worst nightmare: someone who thinks homeownership is "throwing money away." However, skeptical Echo Boomers have a point: the time and money that goes into home maintenance is never recovered, nor the money paid to interest, nor the money paid to homeowner's insurance. For all the praise of owning a home ("building equity" or "best investment"), the downside is seldom spelled out for people - until recently. For an example, the Nobel prize winning economist, Paul Krugman, questioned home ownership. Granted, this is not a popular notion here in the United States, but it is a valid statement. Renting, in some cases, is superior to home ownership.

I speak with many Echo Boomers who love to move around a lot, and don't intend to stay in their area. If they plan to move to other states or cities, why buy a home? Not only is there the costs of insurance, interest and maintenance, but you can't always rely on your home selling for what you paid for when you're ready to move. The last thing you want when you receive a job is to be tied down to a home.

While it's difficult to assess in the long run, Echo Boomers may not be a generation that values home ownership as much as former generations. Pendulum swings of society often go back and forth, and Echo Boomers may be the backlash generation against home ownership. One thing is certain, however, Echo Boomers don't want homes right now.

3: Your graduate degree is your castle.

"Personally, I'll take a Ph.D. over a home." ~ An Echo Boomer expressing financial goals

Echo Boomers value higher education, above and beyond the basic undergraduate degree. Throughout college, I read that bachelor's degrees were the new high school diploma, while professional degrees were the new college degrees. True or not, this fever caught on as more Echo Boomers tell me their goal is to continue their education beyond an undergraduate education.

The problem, however, is that a graduate degree is not always a path to a higher income. As a case in point of this, many people in my profession bring in a higher income than many college professors with Ph.D.s. Add to that my profession doesn't require a college degree whatsoever, so even someone like myself, who wasted a few years in college, is behind others, who remained in my profession without wasting money on education. The point here is that higher degrees don't mean Echo Boomers will be wealthier in the future.

Higher education can bring costs in the form of student loans. These massive loans for graduate degrees (often in the $40,000 to $60,000 range) might be the mortgage of the future. Keep in mind, many Echo Boomers will defer payments, only increasing the principal balance of their student loans. The financial commitment these Echo Boomers have to higher degrees limits their other possibilities, like buying a home.

Even if we assume that Echo Boomers with graduate degrees will make more money, we must also state that many of them will also possess more debt. This debt will lengthen the time it takes them to buy their first home (assuming they want one), and will limit the type of home they can buy. You may think, "But they have a higher income," but the reality of costs toward commitments adds up quickly.

The final point on graduate degrees is that they increase an Echo Boomer's opportunity in the form of work, while limiting an Echo Boomer's opportunity in the form of costs. Essentially, these Echo Boomers have more doing freedom, but less consuming freedom. However, this may be a reflection of Millennial values - doing beats consuming. But if that opinion remains prevalent among Echo Boomers, home ownership will lack any appeal.

Tuesday, April 12, 2011

How Do the Rich Ones Spend?

From a recent study:

A new survey by the independent and objective New York City-based Luxury Institute shows wealthy individuals 35 years of age and younger avidly consuming a wide range of new media on smartphones and tablet computers, and quickly losing the television, radio and print newspaper consumption habits of their parents. Seventy-percent own smartphones (40% iPhone, 24% BlackBerry) and 23% already have an Apple iPad.
Part of this is due to financial access, however, as the media change, I would expect to see electronic devices play a larger role among the wealthy. We live in an age that the wealthy can find their target information on few places and have regular access to it.

From my own experience with Echo Boomers, the wealthy Echo Boomers tend to be more informed about what's going on in the economy, but their sources tend to be specialized (ie: a financial analyst who blogs versus an article on financial analysis).

Monday, April 11, 2011

How Echo Boomers Find Jobs

A recent study shows that Echo Boomers use LinkedIn as often as newspaper postings. The trend, beginning from 2010, suggests that more Echo Boomers will be using LinkedIn in the future over newspaper postings. Keep in mind, from a local standpoint, newspaper postings might be more effective, whereas LinkedIn can connect you with people you already know.

Friday, April 8, 2011

"I Hate My Career"

Each Friday, The Echo Boom Bomb will feature a common question among Echo Boomers and/or their parents concerning economics or finance concerning the Millennial generation. These questions are often asked by Echo Boomers and/or their parents that I survey or can be directed to my email at echoboombomb [at] gmail [dot] com. If you email a question, please be sure to keep it concise and direct.

Question: I borrowed a large amount in student loans to be in a career that I hated. I couldn't stand my career choice and quit, but now am paying back my student loans. I'm not making the money I would be in my career field, so paying back the loans will take much longer. Are there any other choices for me?

The good news is that your story is not uncommon with Echo Boomers; many of them majored in something during college only to turn around and dislike it. While student loans are an unfortunate consequence, you have learned through doing what you like and what you don't like.

Let me stop here for a brief second and write something to my young readers that they should take note of here: before going into any career field, finding what you love doing - through doing - is imperative to avoid later regret. In other words, I wouldn't drop a dime on anything unless I knew that it was something I wanted to do.

If you're making much less money each month, keep in mind you have options that may help making repayment easier. For Stafford loans, you have forgiveness options on your loan as well. Keep in mind, however, that some of these may restrict your profession and you may enjoy those professions even less than your former one.

Given your situation, I'd recommend using this time to cultivate your character and develop sacrifice. While you may think this is hard at first, once you're beyond your student loans, you'll have developed key traits to financial success.

Thursday, April 7, 2011

Understanding Echo Boomers

Take the Millennial Quiz To See How Millennial You Are

For people who want to understand where Echo Boomers are coming from, Pew Research has a Millennial quiz that measures how "Millennial" you are. Obviously, they use some built in assumptions, but I think that it's a useful exercise, especially for people looking to market products and services to Echo Boomers.

Wednesday, April 6, 2011

How To Sell Real Estate To Echo Boomers

5 Tips To Capture 80% of Your Local Echo Boomers

1. Seek to establish a long term relationship.

Echo Boomers grew up when Enron, Tyco, et cetera experienced trouble, and they hold a distrust for businesses and people in the business community. With the housing market declining in recent years, Echo Boomers have grown skeptical about real estate agents because they know that banal lines like, "Real estate is the best invesment" is not always true. Therefore, Echo Boomers will already be on defense when talking with you.

Focus on things you enjoy about each Echo Boomer, and keep in regular touch with them as many Echo Boomers aren't prepared to own homes. However, they may be in a better position in the future, and they have a tendency to talk to a lot of other Echo Boomers about their business contacts. Remember, that an Echo Boomers' influence doesn't just include their friends, but also their audience on the internet.

2. Build rapport the right way.

Over the years, I've tested many sales techniques on different generations, and while asking, "How's the weather" tends to work with older people, it fails with younger people. Approximately, 70% of the time I ask general questions to Echo Boomers, the result is failure (or, in Millennial lingo, ultra fail). Instead of questions about the weather or the area where they live, ask them what they do for fun or what their interests are. Avoid work-related topics as well: Echo Boomers don't work or value work as much as former generations.

Don't ask this: So, what do you think about the weather?
Ask this: So, what are your hobbies?

3. Avoid Business-Speak.

Mitigate risk. Establish protocol. Improve efficiency. If you work in the business world, you hear some idioms and words that make you cringe. Sure, many business individuals think that they sound smart when saying them, but in reality, they sound distant and academic - both of which encumber people from connecting with you. The most ineffective way to communicate to Echo Boomers is to use these idioms or words.

The greatest acronym in the world for Echo Boomers is KISS: Keep It Simple Stupid. Echo Boomers want a connection with the person they do business with and business-speak blocks any potential connection. In fact, one of the most effective conversational topics I use with Echo Boomers is mocking business-speak.

4. Echo Boomers love technology.

Some businesses don't allow it, but if you can befriend Echo Boomers on online social networks, this will add to your success. Don't make it business related either - remember, these "customers" are your friends. Drop the corporate perspective on clients and embrace the fact that these Echo Boomers are people you'd like to speak with on a regular basis. With technology, success does not only come from word of mouth - let the internet do your work.

5. Recognize the Millennial taste.

Echo Boomers heard in college during financial classes that real estate agents loved to show people expensive homes after cheap homes so that they would buy the expensive homes. However, Echo Boomers tend to value being close to where they work, smaller houses, and more time to do things they love (see Millennial statistics for a wealth of information about Echo Boomers and their tastes). By understanding these values, you won't be selling homes that Echo Boomers will later regret buying, and the money they save will help them enjoy the other areas of life they value.

Keep in mind that Echo Boomers will remember this and help you spread your business. Sure, you may not make as much money per Echo Boomer (which is not a problem if you have a life), but the volume in customers you'll receive will be well worth it in the long run.

Monday, April 4, 2011

"Echo Boomers Are DOOMED!"

Popular Media Mythology

I would expect to see articles like this one become more ubiquitous about Echo Boomers. Luckily, the article is a year old, but other media will paint similar stories. Let's focus on why these articles are popular in the first place before addressing some of the inaccuracies.

Bad news sells. Bad news stimulates fear, and for whatever reason, humans seem to return to fear time and time again. Now, I won't go as far as writing that fear stimulates dopamine (though it might depending on what neurologists find), but I would adduce - based on the success of fearful media - that some humans are addicted to fear (The Culture of Fear cover this well). Make no mistake, I am not blaming media here: at any point in time, humans can shut off media sources if they dislike the fear that's being sold.

I write this blog to convey Millennial financial data and analyze some things in an economic manner, but without the fear. For instance, we may not have a housing recovery since Echo Boomers aren't prepared to buy homes, but that doesn't mean that we, as a country, face steep financial hurdles. If housing doesn't recover, other areas in the economy will do better. For instance, Echo Boomers tend to have student loans encumbering them from buying a home, but they are still stimulating the economy by going to school. A home is not as valued as higher education to Echo Boomers.

My main point here is that you might read some bad news on this blog from time to time, but it's nothing to be afraid of - it indicates that our economy is changing, and people will mutate accordingly.

By contrast, the writer at USA Today states:

Now, stagnant wages, job insecurity, the decline in employer-sponsored health insurance and retirement benefits, the rapid increase in basic expenses, soaring debt and minimal savings have jeopardized the economic security of the entire generation, according to a recent report by Demos, a public policy research and advocacy think tank.
It's official Echo Boomers: we're doomed! However, the article fails to portray reality in a correct manner. During the recession, when this article was written, some companies were cutting back on retirement matches, as an example, as some Echo Boomers told me they lost half or more of their matches. But some Echo Boomers said that their employers raised their matches! Not quite the dismal picture the article above paints. The same holds true for the other claims - many Echo Boomers lost jobs or had their salaries cut, but some Echo Boomers picked up other jobs, started their own jobs, or saw an increase in their pay. No one can say with absolute certainty that everyone is worse off after this recession.

Other problems with the article:
This generation is the least likely of any to be covered by health insurance. Just 61% say they were covered by some form of a health plan, the Pew study said.
This sounds like a disaster until you realize that young people experience very few health problems.
Millennials are graduating from college with an average of $23,200 in student debt, according to the most recent data from the Project on Student Debt. That is a 24% increase from 2004.
We see this all the time in media, but be careful about the deceit of average.
"And many of them don't manage money very well."
The writer fails to mention a brief fact about humanity: we tend to learn from our mistakes, and young people make a lot of mistakes.

The economy is changing, and Echo Boomers will help usher in that change. Yes, that may mean less housing demand; that may mean more student loan debt; that may even mean a generation who would rather spend time with each other than work their life away. But nonetheless, the economy will adapt to these changes, so there's very little reason to be "afraid," unless you are betting on a particular outcome.

Saturday, April 2, 2011

Oph Topik: Do Echo Boomers Lack Empathy?

Each Saturday the Echo Boom Bomb features a post impertinent to Echo Boomers.

A recent study supports a rising notion that Echo Boomers lack empathy when compared to former generations. Although Oph Topik is usually impertinent to Echo Boomers, I think that this study fails in several places. I will add here as well that if one could prove Echo Boomers lack empathy, the social results will also have some economic implications.

1. While the study has been conducted, its size causes concerns, especially if we are to assume its applicable to all Echo Boomers.

2. The study failed to consider some of its own results, for instance

They are more likely, meanwhile, to admit that “other people’s misfortunes” usually don’t disturb them.

That sounds terrible until you consider that Echo Boomers use technology more than any other generation. It is now possible to have conversations with people you've never met face to face. The possible misfortune manipulation (ie: using sob stories to try to manipulate others) factor has increased by an unknown multiple.

Consider that in the past, people didn't experience misfortune manipulation as much since most people came in contact with people they knew. What about now? With technology the sob stories have only increased, and exposure to them has risen. As an example of this, I experienced thousands of misfortune manipulation while in customer service. These stories, which are a form of passive aggressive abuse, desensitize you to a person's problems since most of them are fake.

What I find disturbing is not the lack of empathy, but the people who think that using a sob story can allow them to break the rules and exploit others.

3. The definition of friend has changed. While I am unsure of how people in the early 1900s used friend, I know they didn't mean a picture on Facebook or MySpace. As people move toward electronic means of friendship - which possesses many advantages - relationships may become less emotional in time. A lot of emotion is expressed in flesh and blood, something technology lacks. This doesn't mean that modern friendship will be unemotional, but we shouldn't be surprised if friendship becomes less emotional.

Friday, April 1, 2011

"Should I Consolidate My Debt?"

Each Friday, The Echo Boom Bomb will feature a common question among Echo Boomers and/or their parents concerning economics or finance concerning the Millennial generation. These questions are often asked by Echo Boomers and/or their parents that I survey or can be directed to my email at echoboombomb [at] gmail [dot] com. If you email a question, please be sure to keep it concise and direct.

Question: Should I consolidate any of the following:
$25,000 in student loans at a variable 7% APR.
$8000 motorcycle loan at a variable 19% APR.
$3000 credit cards at a variable 12% APR.

Since all three are variable APRs, I would suggest seeking options for all three. You don't want any of those open if interest rates were to go up (though, interest rates rising is unlikely). The motorcyle loan APR seems unusually high; I would also evaluate your credit and make sure that everything on it reflects accurate information.

As far as the student loans, if you stay with variable student loans, many of them are far less than 7% APR. I would suggest that you seek your fixed options first, before consolidating any loans into a variable option when dealing with student loans.

Some customers ask this question because they may have seen or heard information that debt consolidation fails to work. So if your question is about the effectiveness on debt consolidation in general, it depends on you and how you see debt consolidation.