We believe money always goes where it gets treated the best.
The irony of money moving to where it gets treated the best from a demographic standpoint could dovetail with the historical positive bias that value investing has had.
We believe that many of today’s best investment opportunities are tied to millinnials’ comfort with mobility and their willingness to move around the country.
We believe money always goes where it gets treated the best. A recent article detailing the most attractive places in the U.S. for millennials to buy a house included the following cities1, and that has implications for investing, not just nesting:
Des Moines, Iowa Grand Rapids, Michigan Wichita, Kansas Omaha, Nebraska Toledo, Ohio Dayton, Ohio Oklahoma City, Oklahoma Little Rock, Arkansas St. Louis, Missouri Syracuse, New York
The article shared that these cities have high wages relative to home purchase prices. What are the implications of these cities and others like them around the country being so economically compelling? How can the long-duration investor participate in the movement of money and population to these financially attractive places? Which companies can benefit from the gravitational pull of household formation moving to where their money gets treated the best?
Implications:
Our long-time readers are aware that there are 89 million millennials who will go through their prime household formation in the next fifteen years. Even though there are variables that have pushed back the age at which they form their household, there are 35-40% more of them than the Gen X group. In other words, you have a huge number of people who will go from single and childless to married and parenting. Most surveys show that kids drive people out of apartments into single-family residences.
These millennials are the most educated group of 22-39 year-old people in U.S. history and much of their early employment is congregated in expensive coastal cities in tech jobs or tech-related jobs for non-tech companies. These 20-something boys want to be around single 20-something girls where the best early-career jobs and wages are. Hence, they have flocked to Los Angeles, the San Francisco Bay area, Portland and Seattle on the West Coast and Boston, New York, Washington, D.C., and Miami on the East Coast.