This is the year that baby boomers will pass the torch to millennials as the largest living adult generation. They will also be passing along trillions of dollars to their millennial heirs in what’s being called the Great Transfer of Wealth. A new report looks at a growing population of millennial millionaires, and how they will spend and invest their money, where they will live, and what kind of properties they will buy, along with other key features of the millennial mindset.
Population projections from the Census Bureau show that the millennial population will grow to 73 million this year at the same time that the baby boomer population will shrink to 72 million. The Pew Research Center defines millennials as ages 23 to 38 in 2019. Generation X falls between those two generations and is expected to surpass the Boomers in 2028, when those two generations hit 65 million in population.
The Great Transfer of Wealth
According to this new report by the Coldwell Banker Global Luxury program, millennials are expected to inherit $68 trillion dollars worth of assets by the year 2030. (1) The report says, millennials will have five times the wealth in 2030 than they have now. Many of them already have hit the millionaire mark. WealthEngine data shows about 618,000 millionaire millennials living in the U.S. today. That’s about 2% of the nation’s millionaire population.
Coldwell Banker’s Craig Hogan said in the report, “There is already a large and growing population of millennial millionaires, and there will be even more created over the next decade according to projections.” He says, “The big question is — what will they do with their wealth when this Great Wealth Transfer takes place? Will they sell the luxury properties they inherit from their parents, or will they keep them?”
The study is based on net worth and shows that 93% of millennial millionaires are worth between $1 million and $2.5 million. Almost half of them are older millennials, and 15% of them are also business owners. 92% of them own their own homes. Most own single-family homes. Their average real estate portfolio is about $1.5 million.
There have been plenty of headlines in the past about millennials who don’t want to be tied down to a mortgage, and would rather travel. As the report points out, the Great Recession had a significant impact on millennials, making it harder for them to accumulate the wealth they’d need to buy a home. This was such a big issue that some people have dubbed the millennials as the “Rent Generation.”
But with the economic recovery largely behind us, we’ve been seeing that once millennials get a financial foothold, they are getting married, having kids, and buying real estate. The report says that 67% of millennial millionaires are married. That’s compared to 40% of the rest of the millennial generation. Most millennial millionaires also own their own homes. 80% own a single-family home.
Popular Markets for Millennial Millionaires
So where are the affluent millennials settling down?
The state with the most millennial millionaires may not surprise you. With the lure of the tech and movie industries, 44% of them are in California. New York has the next highest population of millennial millionaires at 14%. Florida and cities like Miami, Jacksonville, and Tampa are third along with Massachusetts and Texas. Each have 5%. Other popular states include Washington which is home to Amazon and Microsoft, New Jersey which is just across the Hudson River from New York City, and Virginia with it’s close proximity to Washington, D.C. Illinois and Maryland are also millennial millionaire magnets. (2)
Although many are in the states with the highest housing prices, millennial millionaires will gravitate toward outlying areas that are less costly, or fixer-uppers. Coldwell Banker’s Jade Mills, says, “It used to be that West Hollywood was affordable. But now that it has gone up in price, rather than not purchase at all, millennials are purchasing property that needs work as long as they are in the area they want to be in.”
Communities that attract millennials are typically more affordable and non-traditional. Coldwell Banker’s Karen Yang says, they want to be able to walk to a corner cafe, where people are gathering. She says, “They want to live near throwback downtowns, or districts that grew organically — and they are willing to give up square footage and amenities to be able to live in those kinds of locations.”
Real Estate as Key to Wealth Creation
The report says, many millennials, such as those living in Silicon Valley, have learned that real estate is the key to wealth creation. Buying a first home is important, and when circumstances change, they know that first home can be turned into a rental. Coldwell Banker’s Christopher Fling says, “They know that wealth building begins with that first primary residence.”
One trend that researchers are noticing — that millennials are looking for vacation-like homes in “non-traditional markets where their dollars go further.” Traverse City, Michigan, is one of those hot spots because there’s so much opportunity for outdoor recreation. Coldwell Banker broker, Shawn Schmidt Smith says, “It’s a small town where you’re never more than 10 minutes from a body of water.” She says, “On a Tuesday when you’re done with work, you can be on the bay stand-up paddle boarding, or in a river fly-fishing within 20 minutes.”
As the millennial influence kicks in, we may see more and more of them opting for places that are more budget friendly than California. According to Business Insider, millennials in search of a better housing deal are going to places like Boise, Idaho; Reno, Nevada; and Phoenix, Arizona. (3)
These millennial millionaires will be very influential in the years to come, and will point the way toward hot real estate markets.
(2) Where Millionaire Millennial are Living: Business Insider
(3) Affordable Markets for Millennials: Business Insider