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America’s ‘Green’ Generation On Track To Drive A Boom In Car-Buying, Housing & Energy Use

Mark P. Mills, Forbes

New data shows that a Millennial car-buying boom has started.  And their preferred car is not a Prius or Tesla, but station wagons and SUVs, and for the leading edge income-earners, luxury and sports cars.  The energy implications are beyond obvious.

This is the year that the Millennial population surpasses the number of Boomers in America. It’s Gen Y’s turn to become the demographic tsunami working its way through the ecosystem of society, and to become the primary driving force for future energy demand.

But it’s a different time you understand.  The iPhone was introduced only in 2007 when half of today’s Millennials were still under 18 years old; Facebook launched in 2004, Twitter in 2006, and Uber in 2009.  Google introduced its self-driving car only a few years ago. Boomers meanwhile came of age with touch-tone phones, mainframes, and the automatic transmission.

The prevailing hypothesis among a new class of “peak demand” pundits is that this is the decade of both Peak Car and Peak House.  The energy relevance?  The purchase of a car or a house represents an individual’s two biggest energy-using decisions.

The peak demand thesis is that Millennials prefer bicycles and mass transit and car-sharing over personal cars, and prefer Bohemian urban apartments and condos, shared or otherwise, over (horrors) the iconic Madmen era suburban home with a yard, fence and two-car garage.  If such were the actual future, it would indeed have important energy implications.

But it’s not true.

New data shows that a Millennial car-buying boom has started.  And their preferred car is not a Prius or Tesla, but station wagons and SUVs, and for the leading edge income-earners, luxury and sports cars.  The energy implications are beyond obvious.  (I’ve expanded on this in the Wall Street JournalWe’re a Long Way From ‘Peak Car’.)

When it comes to both cars and houses, recent behavior and surveys show that Millennials hold views rather like Boomers after all.  (Of course there are generational differences: see the excellent survey compilation from PEW.)  It turns out that the debilitating effect of the Great Recession with a long slow recovery was the primary factor in slowing car and housing sales for everyone including Millennials.  A two percentage point increase in economic growth leads to a 20 to 40 percent increase in the number of houses that are built per capita.

Earlier this year, Census data revealed a significant net migration of Millennials is already under way from the city to the suburbs.  New surveys show that 66 percent say they plan to live in a single-family suburban home.  And in another indicator of how the Millennials blend traditional and tech-savvy behaviors, it appears that while they are more likely to shop online for a home, they are also more likely than Boomers to use an old-fashioned real estate agent.

It should thus be no surprise that home-building giant, Lennar Corporation, just announced a decent (still not boom times) growth in new orders.  Imagine what happens when, in due course, Gen Y, which has come of age in the longest recession in modern history, finally experiences robust economic growth.

Suburbanization a priori means more cars per person and more distances traveled to work.  But building and operating homes is in itself a separate and surprisingly big energy-consuming activity too.

The buildings where we live, work and vacation consume almost 40 percent of the nation’s energy–about twice that of all the cars on the road.

This single fact explains why so much digital tech and public policy is preoccupied with “smart buildings” to save energy.  More on that in a minute.

Before the Great Recession, energy planners worried about the McMansion effect in residential housing, the rush to build bigger and bigger homes.  That worry certainly evaporated and may now seem quaint in the wake of the housing bust.  But you can bet it will be back yet as a primo problem for the peak demand crowd.

In an era where policymakers and regulators push so hard on automobile fuel efficiency we should expect the resurrection of a pre-Recession idea floated by now retired Rep. Dingell (D-Mich.), then chair of the House Energy and Commerce Committee: eliminating the mortgage tax deduction on big, energy-hogging homes, the SUVs of the housing market. […]

Now, as America emerges from the depths of the recession and, especially if robust economic growth happens, there is no reason to believe that the future will look much different than the past.  We are already seeing that today’s dominant demographic cohort will behave much the same as yesterday’s.  One thing though has changed a lot since the Boomers boomed; i.e., technology…

So as the Millennials move into suburban homes, they’ll be building next door to the Boomer parents. Net net; more homes and more energy demand. 

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