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发帖数: 481 | 1 Recession Generation Opts to Rent Not Buy Houses to Cars
By Caroline Fairchild | Bloomberg – Wed, Aug 8, 2012
The day Michael Anselmo signed a lease on his first apartment in New York
City, he lost his job at Buck Consultants LLC. He spent about 10 months
struggling to pay rent with unemployment benefits. Two years later he's
still hesitant to buy a home or even a road bike.
"Every decision that I have made since I lost my job has been colored by
that insecurity I feel about the future," said Anselmo, 28, who now rents an
apartment in Austin, Texas, and works as a consultant for UnitedHealth
Group Inc. "Buying a house is just further out on the timeline for me than
it used to be."
Anselmo and many of his peers are wary about making large purchases after
entering adulthood in the deepest recession and weakest recovery since World
War II. Confronting a jobless rate above 8 percent since 2009 and student-
loan debt hitting about $1 trillion, 20-to-34-year-olds are renting
apartments, cars and even clothing to save money and stay flexible.
As the Great Depression shaped the attitudes of a generation from 1929 until
the early years of World War II, so have the financial crisis and its
aftermath affected the outlook of young consumers like Anselmo, said Cliff
Zukin, a professor of public policy and political science at the Edward J.
Bloustein School of Planning and Public Policy at Rutgers, the state
university of New Jersey.
Recession Effects
"This is a generation that is scared of commitment, wants to be light on
their feet and needs to adjust to whatever happens," said Zukin, who's
researched the effects of the recession on recent college graduates. "What
once was seen as a solid investment, like a house or a car, is now seen as a
ball and chain with a lot of risk to it."
One key difference is that technology now allows companies to provide
younger consumers access to what they want, when they want it and at a
reduced cost, said Paco Underhill, founder of New York-based consumer-
behavior research and consulting firm Envirosell.
"Renting is something that is in play that wasn't in play during the Great
Depression," he said. "To a modern generation, ownership isn't about having
it forever, it is about having it when you need to have it," said Underhill,
who has studied shopper behavior.
Hourly Rental
Enterprise Holdings Inc. and Hertz Global Holdings Inc. (HTZ) are expanding
in what the Santa Monica, California-based research firm IBISWorld estimates
to be the $1.8 billion hourly car- rental business, a segment dominated by
younger drivers and made popular by Zipcar Inc. (ZIP) Startups such as Rent
the Runway Inc. are supplying high-fashion apparel to satisfy those who want
to wear, not own. CORT, a unit of Warren Buffett's Berkshire Hathaway Inc.
(BRK/A), is increasing its furniture-rental marketing efforts to college
students and fledgling households, said Mark Koepsell, CORT's senior vice
president.
"Renting makes a lot of sense," said David Blanchflower, professor of
economics at Dartmouth College in New Hampshire and a Bloomberg Television
contributing editor. "They have no money and they are not buying fridges and
they are not buying the things they normally buy when they set up homes.
Their incomes are a lot lower."
College graduates earned less coming out of the recession, according to a
May study by the John J. Heldrich Center for Workforce Development at
Rutgers. Those graduating during 2009 to 2011 earned a median salary in
their starting job $3,000 less than the $30,000 seen in 2007. The majority
of students owed $20,000 to pay off their education, and 40 percent of the
444 college graduates surveyed said their loan debt is causing them to delay
major purchases such as a house or a car. The U.S. Consumer Financial
Protection Bureau said in March it appeared student loans had reached $1
trillion "several months" earlier.
U.S. Economy
The U.S. economy shrank 4.7 percent from December 2007 to June 2009, making
it the deepest and longest slump in the post- war era. In the three years
since the recession ended, the economy has expanded 6.7 percent, the weakest
recovery since World War II.
Even as the housing market shows some signs of revival, the slow pace of
recovery is keeping the younger generation fearful of investments rather
than confident about building wealth for the future, said Jeffrey Lubell,
executive director for the Center for Housing Policy, based in Washington.
First-time home buyers in 2011 accounted for the smallest percentage of the
total since 2006, according to the National Association of Realtors. The
vacancy rate of U.S. rental properties is at its lowest level since 2002.
The shifting attitudes also pose a threat to retail sales, said Candace
Corlett, president of New York-based retail- strategy firm WSL Strategic
Retail. Younger consumers are already comfortable buying used items and
borrowing from friends. Renting will only reinforce their tendency not to
buy new.
Post-Recession
"In a post-recession economy where retailers are trying to make every
shopper count, it's the wrong direction," she said. Retail sales fell in
June for a third consecutive month, the longest period of declines since
2008.
The by-the-hour segment accounts for about 6 percent of the $30.5 billion U.
S. car-rental market, a share that is forecast to rise to about 10 percent
in five years, according to IBISWorld.
St. Louis-based Enterprise, the largest U.S. car-rental company, expanded in
the segment in May by acquiring Mint Cars On-Demand, an hourly car-rental
firm with locations in New York and Boston. Half of Enterprise's customers
in this segment are under 35, according to company spokeswoman Laura Bryant.
Hertz, which began renting cars by the hour in 2008, plans to equip its
entire 375,000-vehicle U.S. fleet with the technology for hourly rental
within about a year, said Richard Broome, senior vice president of corporate
affairs and communications for the Park Ridge, New Jersey-based company.
Fuel Costs
"It made sense to reach the younger demographic to get involved in car
sharing," Broome said. Those 34 and younger make up 84 percent of Hertz's by
-the-hour customer base, he said. "The higher costs of insurance, the higher
costs of fuel, the economics would lead someone to conclude that it's a
better decision to rent the car or do car sharing than it is to own a car."
Zipcar, the Cambridge, Massachusetts-based company that joined the market
segment in 2000, says it now has about 731,000 members and more than 11,000
vehicles worldwide. More than half of Zipcar's customers are under 35, said
Mark Norman, the company's president and chief operating officer.
"Whether it's movies by the month, music by the song or formal wear by the
occasion, all of those are a smarter way to think about consumption, and
Zipcar fits into that really well," he said. Zipcar's shares have dropped 43
percent this year under the threat of the new competition.
New Cars
While sales of new cars are rebounding, 18-to-34-year-olds accounted for 11.
8 percent of vehicle registrations for new cars in the five months through
May, compared with 16.5 percent in May 2007, according to data from R.L.
Polk & Co., an auto- industry research company based in Southfield, Michigan.
Jared Fruchtman, 25, said using Zipcar gives him about $600 more a month to
spend on dinners out, cab rides and trips on the weekends.
"It wasn't financially worthwhile to buy or lease a car right now," said
Fruchtman, who is studying to be a certified public accountant and lives
with his girlfriend in a rented apartment in San Francisco.
"I never considered buying," he said. "It didn't make sense to tie ourselves
down right now."
High Fashion
That attitude extends to clothes. Rent the Runway, a website that offers
high-fashion gowns and other couture for around 10 percent of the purchase
price, is also targeting younger consumers. President Jennifer Fleiss, 28,
said its business model is "almost recession proof." Since its start in 2009
, the company has grown to about 3 million online members and is adding
approximately 100,000 per month. In May 2011, the New York-based company
raised $15 million in venture capital from outside investors, said Fleiss.
Rent the Runway members typically range from 15 to 35 years old, she said.
Lindsay Abrams, 22, started working in 2009 as an on-campus representative
at Vanderbilt University in Nashville, Tennessee, one of 175 colleges with
company-sponsored teams to drive brand awareness.
"The recession has been an important part of Rent the Runway's popularity,"
said Abrams, who has rented about 15 dresses and is now a customer
communications associate for the company. "For people my age, the new thing
is renting versus buying. It is a great way to save money."
Furniture companies are also getting in on the act. Chantilly, Virginia-
based CORT, the world's largest provider of rental furniture, boosted its
efforts in 2009 to reach college students and younger customers.
Student Furniture
Koepsell, the senior vice president, said the company was "foolish" not to
aim for the market earlier. Last year, CORT provided furniture to about 15,
000 students and predicts that number will grow to 25,000 this year.
Among CORT's customers is Michael Ferraiolo, a 20-year-old senior at
Virginia Tech, who pays $198 monthly for everything from beds to a coffee
table to furnish the rented townhouse he shares with two roommates in
Blacksburg, Virginia.
"With the job market such an uncertainty, none of us know where they are
going to end up," Ferraiolo said. "Now, more than ever, you see people
moving around in different job markets all throughout their career. We just
don't know what to expect."
Shifting attitudes about larger purchases aren't the only reason preventing
young consumers from buying. Stricter lending practices and higher
requirements for down payments on houses and cars are crowding out buyers,
Blanchflower, the Dartmouth economist, said.
Build Wealth
For those who choose to rent not buy, there's a price to pay, said Lubell of
the Center for Housing Policy. By foregoing purchases of assets like homes,
young people are giving up on a chance to build wealth, he said.
"What you are seeing is a delay in all the kinds of decisions that require a
long-term financially stable future," Lubell said. "That's home purchases,
that's marriage and that's having kids."
Anselmo, the health consultant who rents an apartment in Austin, Texas, says
he understands such arguments. Even so, he can't bring himself to buy a
house.
"The logical person in me gets pissed off when I write a check every month
and it just goes down the drain," he said. "But we are very hesitant." | D**S
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