Good job, millennials: You’ve just doubled your total net worth since the pandemic began, according to a new report. In other words, if you own a house.
Millennials’ total net worth jumped 106% to $9.38 in the first quarter, from $4.55 trillion in the first quarter of 2020 – when the COVID-19 outbreak became a global pandemic.
The average millennial net worth is now $127,793, as of the first quarter of this year. In 2020, that number was $62,758.
The report, from MagnifyMoney, looked at figures from the Distribution Financial Accounts, which are part of the Federal Reserve, and US Census Bureau demographics to estimate the average net worth of millennials. Millennials are defined as people born between 1981 and 1996.
A pause in paying student loans and unemployment benefits has helped millennials accumulate wealth over the past two years, the report said.
But here’s the caveat for millennials whose net worth has doubled in the past two years: rising house prices have been the main driver of asset accumulation for millennials.
“A break in student loan repayments and unemployment benefits has helped millennials accumulate wealth over the past two years, but rising house prices have been the main driver.”
Real estate made up the bulk of millennial net worth, according to MagnifyMoney, with 35.6% of millennial assets tied to homes. This is the highest among the categories tracked.
If they had taken out a mortgage in the past two years when mortgage rates were at historic lows, buying a house gave them “a significant head start”, said Ismat Mangla, executive director from MagnifyMoney.
Borrowing costs are now much higher: The average rate on a 30-year fixed-rate mortgage is now 5.54%, as of July 21, according to Freddie Mac. A year ago, the 30-year was at 2.76%.
Meanwhile, home prices in the 20 largest cities in the United States have jumped 20.5% since last year, according to S&P CoreLogic Case-Shiller.
Bottom line: Millennial homeowners have benefited from high inflation, being able to accumulate wealth quickly as their property prices rise.
“Baby boomers still own just over 50% of the nation’s wealth, followed by Gen Xers who own about 30%. Millennials are still catching up – they own 6.6% of America’s wealth.”
Pension entitlements also make up about one-fifth of Millennials’ net worth, with one-tenth made up of consumer durables and private businesses.
But Generation Y does not come without (financial) baggage.
On the liabilities side, Generation Y debt is made up of mortgages (nearly 63%) and consumer loans (around 36%).
Consumer credit includes things like auto loans, credit cards, and other personal loans. Millennials also carry the most consumer credit card debt compared to other generations.
Another important caveat: baby boomers still hold just over 50% of the country’s wealth, followed by Generation X who own around 30%. Millennials are still catching up and own about 6.6% of America’s wealth.
Write to MarketWatch reporter Aarthi Swaminathan at firstname.lastname@example.org