There’s no shortage of headlines about how young adults have delayed milestones like marriage and family, but Jefferies argues that the trend is winding up. Housing-related stocks can benefit, the firm says.
The back story. For years, millennials were scolded for splurging on lattes and avocado toast instead of buying houses. Many countered that the financial ramifications of the Great Recession, which continue to affect the group, were to blame.
Now, millennials are growing up and making more adult-type purchases, including buying houses and condominiums. That means they are buying appliances and furnishings, too.
What’s new. Better late than never. That’s the take from Jefferies analyst Laurence Alexander. He writes that while investors may not want to have exposure to companies selling expensive durable items this late in the economic cycle, the category is getting a boost from younger shoppers. As low interest rates have lowered financing costs for housing, millennials are moving in.
They “are shifting into a number of big ticket categories, one reason why housing and home showed well” in a consumer survey the firm recently conducted, the analyst says. The data indicate that millennials and Gen Z are “the most likely to have bought a house/condo, and looking ahead, are the most likely to plan to purchase major furniture and a car/truck.”
(That said, they aren’t wholly abandoning their roots. Intentions to buy recreational vehicles and boats may reflect interest “in enhancing their Instagram feeds,” he writes.)
Looking ahead.The survey also showed that younger shoppers were largely making these big purchases when external factors, such as a promotion or pay raise, helped boost their savings. As a result, Alexander says, “Any future signs of labor market weakness will be an issue.”
Home Depot (HD), Lowe’s (LOW), and Floor & Decor Holdings (FND) appear likely to benefit from the shift. They also stand to gain as eco-conscious younger people, who may be more willing to replace older appliances with greener models, come to account for a bigger share of the customer base.
Other companies tied to home purchasing and improvement, such as Fortune Brands Home & Security (FBHS), PGT Innovations (PGTI), Jeld-Wen Holding (JELD), Trex Co. (TREX), and Sherwin-William s (SHW) could also get a boost.
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