Want to be a homeowner? Just cut out avocado toast
MILLENNIALS have enough problems as it is. Must they give up their avocado toast, too?
In an interview with Australia’s 60 Minutes on Monday, Tim Gurner, a 35-year-old real estate mogul in Melbourne, suggested that young adults would be more likely to be able to afford to buy a home if they curbed their discretionary spending, like on this trendy and expensive brunch item.
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said. “We’re at a point now where the expectations of younger people are very, very high. They want to eat out every day, they want travel to Europe every year.
“The people that own homes today worked very, very hard for it,” he said, adding that they “saved every dollar, did everything they could to get up the property investment ladder”.
The advice spread on social media and it was not well received. Some found the statement impractical or insulting.
Research suggests that people between the ages 18-34, a group often referred to as millennials, are no more freewheeling with their spending on travel and dining than other generations. And it would take a lot of skipped avocados to put a dent in the heavy costs of homeownership, which is not always a prudent financial goal.
According to the Food Institute, which analysed Bureau of Labor Statistics expenditure data from 2015, people from the ages of 25-34 spent $3,097 on average on eating out. Data comparing this age group against itself through the decades was not readily available. But the bureau’s report indicated that this group spent $305 more than people between the ages of 55-64 – a group that encompasses some baby boomers – and $89 more than the overall average, including spending among people ages 35-54.
The truth is, even if a millennial assumed the eating out habits of a baby boomer, it would take around 113 years before they could afford a down payment on a home (assuming a 20 percent down payment on the median price for a home in the United States, $315,000 in March 2017, and a 1 percent yearly yield rate).
Yes, you would surely save money by choosing to make your own avocado toast at home. The average price of a single avocado in March was $1.25, according to the Hass Avocado Board. One Twitter user, Nora Biette-Timmons, calculated that it costs her about $1.65 per serving – or about 1/477,896 the price of an average home in Brooklyn. Compare that with New York City brunch prices, where you are likely to spend $10-$20 for ornately dressed toast, and the savings are clear.
But all generations of Americans are eating out now more than before, with food away from home rising from 25.9 percent of food expenditures in 1970 to 43.1 percent in 2012. It is not clear if millennials are driving that trend.
As for Gurner’s second suggestion – skipping the European vacation – there is indeed an opportunity for savings, but research suggests millennials are the generation spending the least on travel.
Millennials spent $4,832 per year on vacations, just below $5,078 by GenXers and $5,012 by Boomers, according to MMGY Global’s Portrait of American Travelers in 2016. The study surveyed 2,948 adult travellers with annual incomes above $50,000.
Millennials were less likely than older generations to say they were cutting back on travel because of budget concerns, but were most likely to have difficulty getting time off work. They were also most likely to say they were too busy to get away.
Another wrinkle in pitting age-specific preferences against buying a house: Homeownership is historically lower among young adults and has declined across most age groups since the financial crisis, as the ratio of home prices to median household income climbed.