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A New Home for Millennials

A New Home for Millennials

Some of my earliest memories come from being at my grandfather’s house in India. Growing on one side, there was a huge mango tree that I would climb to get ripe, juicy mangoes. On the other side, there were pear, guava and jackfruit trees.

My summers were often spent reading and then plucking ripe fruit to snack on.

Everyone has memories like this around the house they grew up in. For Americans of previous generations, it’s the family home that they lived in for most of their lives.

The idea of a home that belongs to you, one where you build memories, is still something that most Americans desire when they reach adulthood.

Today, the largest generation in American history has reached this point of adulthood. They’re ready for their own homes.

And as a result, something shocking is about to happen to the economy and the stock market.

This group of Americans — between the ages of 18 and 34 — is the millennial generation.

Born between 1982 and 2000, they came of age in the new millennium.

Millennials are the largest generation in American history, at 92 million strong.

The oldest of the millennials are now 34 years old, which is significant because that’s about the time, based on past data, that Americans begin to buy homes, buy cars and have kids.

Buying a house is easily the biggest purchase you’ll make in your life. And it’s one of the rites of passage of American adulthood, based on the behavior of previous generations.

Millennials are no different.

Rebuilding the Economy

For the third straight year in a row, the National Association of Realtors reports that millennials represent the largest single group of homebuyers at 35%.

And remember, this is just the first wave of millennial home buying. For the next 18 years or so, we’re going to see huge home demand as millennials arrive at adulthood.

This surge in home-buying demand is critical for the U.S. as it generates significant economic growth across the spectrum of sectors. That’s because buying a home causes you to take out your wallet and spend … and spend … and spend.

Homeowners know how much money it takes to get a home started … furniture, rugs, endless trips to the hardware store, calls to plumbers, electricians, handymen, contractors to fix everything from windows to doors to roofs.

When you put it all together, buying a home is the biggest stimulus to the economy ever. And when you have wave after wave of people coming to buy a home, it’s like having an economy that is constantly getting growth surges as a result.

That’s not my opinion. This was proved out by Ed Leamer, a UCLA prizewinning economics professor using data that went from 1949 to 2007.

In every case, housing was the critical factor to economic growth.

Playing Housing

With the first wave of millennials buying homes, you want to get some exposure to the housing stocks that are going to benefit.

Surprisingly, housing stocks and companies related to construction aren’t pricing in the sales and earnings that are going to come because of recent market volatility. You can actually still get into this sector at a discount.

If you want to make a laser-focused bet on the U.S. housing market, buy the iShares U.S. Home Construction ETF (NYSE Arca: ITB). This exchange-traded fund (ETF) owns all the big homebuilders such as Lennar and Toll Brothers, as well as shares of retailers Home Depot and Lowe’s, paint company Sherwin-Williams, furniture company Ethan Allen and many others that benefit from increasing home sales.

I first recommended this ETF on February 18, and it’s up nearly 21% since then, outpacing the broad market.

And to make a general bet on the U.S. stock market surging higher due to economic growth coming from millennials, you can buy the Dow Jones Industrial Average ETF (NYSE Arca: DIA). This ETF is going to give you exposure to the broad market. I recommended this ETF on February 12, and it’s up roughly 23% since then.


Paul Mampilly
Editor, Profits Unlimited

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