Millions of millennials are delaying home and car purchases due to inflation

According to CNBC’s Millionaire Survey, millennials are temporarily suspending major purchases as interest rates and inflation rise.

Nearly half of millennial millionaires say higher borrowing costs are causing them to delay buying a car, and 44% say higher interest rates have delayed them buying a home, according to the survey. More than a third said inflation caused a flight or vacation delay.

The CNBC Millionaire survey, which surveys those with investable assets of $1 million or more, indicates that inflation and rising borrowing costs are working their way up the wealth ladder. While inflation is hitting the middle class and lower-income groups harder, higher interest rates are starting to put pressure on younger, wealthier consumers, especially for more expensive goods.

According to the survey, millennials are three times more likely to cut back on their big purchases than their baby-boomer counterparts.

“Millennial millionaires are clearly dealing with something they haven’t tried before,” said George Walper, president of Spectrem Group, which conducts the survey with CNBC. As a result, they change their behaviors and spending plans.

The Spectrem Group and Survey consider respondents born in 1982 or later, and those age 40 or younger, to be millennials. Participants who were born between 1948 and 1965, who range in age from 57 to 75, are considered to be baby boomers.

Inflation and rising rates have created two separate but related spending constraints for affluent consumers.

Inflation has driven up the price of luxuries such as dining out, airline tickets, hotels, and even some monthly subscriptions. According to the survey, 39% of millennial millionaires have cut back on eating out due to rising inflation. Thirty-six percent cut back on vacations, and 22 percent cut back on driving.

At the same time, the Fed’s increase in interest rates has increased the cost of borrowing, especially for homes and cars. The central bank on Wednesday raised its benchmark interest rate to a range of 1.5%-1.75% and said another hike could come in July.

Two-thirds of millennial millionaires surveyed said they were “less likely than last year to borrow money” due to higher interest rates. This compares with only 40% of baby boomers.

Forty-four percent of millennials surveyed said higher rates have prompted them to delay buying a new home, compared to just 6 percent of baby boomers. Nearly half of millennial millionaires said they are putting off buying a car because of high rates — more than twice the rate of baby boomers.

Millennials are a major driver of sales growth for both homes and cars.

“Millennials, like everyone else, see the mortgages they were looking for in January are now more than double that,” Walber said.

The Millionaire survey was conducted on CNBC in May, before the latest Fed rate hike. The study surveyed nearly 750 respondents who reported that they are financial decision-makers or participate in financial decision-making within their families.

Millennials seem more optimistic about their investments than older millionaires, however: 55% of millennial millionaires said inflation would last less than a year, compared to nearly two-thirds of baby boomers who said it would last at least a year or two. 40% of millennials surveyed plan to buy more shares as inflation accelerates, compared to just 11% of boomers.

Millennials are also more optimistic about the impact of inflation on their stock returns: Nearly 90% of millennial respondents are “confident” or “somewhat confident” in the Fed’s ability to manage inflation—a stark contrast to 38% of millennials. A baby boomer who “isn’t”. Absolutely confident.”

More than 70% of millennial millionaires think the economy will be stronger or even “much stronger” at the end of 2022, compared to two-thirds of boomers who say it will be weaker or “much weaker”. Millennials also said asset markets would end the year above 2021 levels – an upward display of confidence as the S&P 500 is down 20% for the year so far.

58% of millennial millionaires said asset markets would end the year at least 5% higher, with 39% expecting double-digit gains. By contrast, 44% of baby boomers expect the market to decline in double digits.

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