Market Overview

Komunumo: Multi-Generational Households, Economy, and Stocks to Watch


In light of tough economic times, stagnant wages, and rising costs of living, multi-generational households are becoming more popular as multiple generations choose to live under the same roof in order to conserve resources.

Yahoo! News recently reported how "[m]ore than 50 million Americans, including rising numbers of seniors, live in households with at least two adult generations, and often three." Whereas this increase can be attributed to the Great Recession, "economic and housing problems have resulted in low rates of migration and new household formation." While a recovery could halt or reverse an increase in multi-generational households, the article suggested that "most current reports ... do not show any slowdown in the growth of multi-generational households."

According to the Pew Research Center, "The number of Americans living in multi-generational households has been increasing steadily since 1980. Demographic forces such as delayed marriage and a wave of immigration have contributed to the increase." Per Yahoo! News, "The biggest driver of the change was financial pressures on younger adults that caused them to move back into their parents' homes." Interestingly, Pew Research has found "that most people have benefitted economically from the trend and also looked favorably on the experience." From the article: "The different generations have tended to pitch in to make ends meet, both financially and in terms of household chores and caregiving."

Having multiple generations and families living under one roof can have practical advantages. As CNN's Les Christie recently commented, "For multi-generational households, there is typically a nice payoff. Not only do they save money, but they are better able to avoid financial hardship." According to Pew Research, the poverty rate for those in multi-generational households was 11.5 percent in 2009 while the poverty rate for those who did not live with other adults other than their spouse or partner was 14.6 percent.

NPR's Marilyn Geewax discussed on Tuesday how "[b]etween 2007 and 2009, the total number of Americans living in multi-generational households shot up more than 10 percent." Geewax explored the difficulties of baby boomers who are stuck in the middle of aging parents and adult children unable to "launch". From the report: "And just as record numbers of families were dealing with the impact of having slow-to-leave children and long-to-linger parents, the Great Recession hit. That made everything tougher." In the midst of rising costs of living, rising higher education costs, excessive student loan debt, and the collapse of the housing market, "the generation in the middle faces an array of financial pressures."

The Times-Standard's Amy Taxin reported on Tuesday that in order to deal with multiple generations living under one roof, "[b]uilders across the country are revamping home designs." Taxin: "The housing industry is trying to keep up with the changes by adding self-contained suites to single-family homes from North Carolina to California to enable families to stay close while retaining a greater degree of independence." Whereas "new home sales have struggled" in light of foreclosures and various other economic factors, sales of multi-generational homes appear to be growing quickly. According to homebuilding company Lennar's western regional president Jeff Roos, "Multi-generational homes are expected to account for roughly 30 to 40 percent of new homes in communities where the floor plans are being offered."

One dimension to the prospect of multi-generational households is a lagging housing recovery. Phil Izzo suggested in a blog for the Wall Street Journal on March 24, 2012 that young adults may favor living with parents over independent living. Izzo: "As long as everyone gets along, the multi-generational household could be in for a more permanent resurgence." That being said, a surge in multi-generational living arrangements could bring about a drop in aggregate demand for all the accoutrements, appliances, and required services of independent living, e.g., electrical kitchen devices, washers, dryers, lawn mowers, vacuum cleaners, et al. Such societal changes could also lead to more families embracing farming methods in order to grow their own food or raise fish to decrease grocery expenses.

A second dimension to multi-generational households is the phenomenon's impact on banking. According to an article published Monday on Business Insider written by Gary Anderson, "The bankers are up in arms. Household formation is what makes bankers lust for profit. It is ready made debt strapped to the bodies of the populace, with the profits going to Wall Street." According to Anderson, multi-generational families scare the big banks, the IMF, and even Jim Cramer. Whereas young adults can simply live with their parents thereby avoiding the credit and debt processes of mortgages, Anderson suggested that a decline in individuals' seeking credit is "making bankers tremble". Along this same line of thought, it is significant to note that Zero Hedge recently had an article questioning whether "housing is done for a generation". According to Charles Hugh Smith, "A strong case can be made that the fundamental supports of the housing market -- demographics, employment, creditworthiness and income -- will not recover for a generation." If one continues down this line of thought further, a substantial increase in multi-generational households would appear to portend a future society of quasi-medieval familial communes being established where various families trade and deal with one another. Such a situation would effectively call into question the viability of not only the American education system and employment, but also the flow of commerce and the future of American consumerism.

A third dimension to multi-generational households is that of viable investing and trading opportunities. MarketWatch's Andria Cheng discussed on Monday how homeowners are planning to do more remodeling -- "that is good news for the top two US home-improvement retailers Home Depot Inc. (NYSE: HD) and Lowe's Cos. (NYSE: LOW)" Even further, "The Commerce Department said Monday that March retail sales of building materials and garden equipment rose 3% from February, the biggest increase in almost a year and a half." In addition to Home Depot and Lowe's, traders can take a look at Lumber Liquidators Holdings, Inc. (NYSE: LL). Traders can also keep an eye on Tractor Supply Company (NASDAQ: TSCO) as consumers may look to gardening at home in order to avoid high prices at the grocery store.

Those who follow my articles on Benzinga know that multiple-family living arrangements and communalism are recurring themes in what I write. From the prospect of kibbutzim in the US to communal religious establishments to the viability of retirement, multi-generational households may become commonplace in society in the near future. In light of the "boomerang generation" and problems in the labor market, multi-generational living arrangements could prove to be quite an advantageous, economic alternative to poverty -- thereby giving economic hope to those who may be lacking hope given the struggling economy.

Posted-In: Long Ideas Wall Street Journal Psychology Topics Economics Markets Media Personal Finance Best of Benzinga


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