The Financial crisis of 2007-2009 was one of the most financially destabilizing periods of this century. People belonging to the Gen X generation were the worst hit by the economic crisis since they were new to the housing market and bought homes at high prices with huge debts. However, they are also the only generation to have recovered their lost wealth as per a study by Pew Research.
The crisis and Gen Xers
“The median net worth of Gen X households had declined 38 percent from 2007 (US$63,400) to 2010 (US$39,200), while the typical wealth loss for Boomer and Silent households was not as steep (26 and 14 percent, respectively). Millennials, who were beginning to form households and accumulate wealth (the oldest was only 26 in 2007), were hit hard by the resulting Great Recession in terms of employment and earnings, but not in terms of wealth destruction, as they had little wealth to lose,” according to Pew Research.
Gen X homeowners saw the biggest decline in their home equity, falling 43 percent from around US$66,000 in 2007 to US$37,600 in 2010. In contrast, the home equity of the Boomer and Silent generations only declined by 28 and 15 percent respectively. The value of financial assets owned by Gen X homes also fell by 20 percent from 2007 to 2010. As a consequence, Gen Xers ended up financially suffering the most. However, they rebounded faster and better when compared to others.
Gen X homeowners saw the biggest decline in their home equity. (Image: Amy Walters via Dreamstime)
A survey conducted by Morning Consult and Business Insider found that Gen X is the most stressed about credit card debt, with about 50 percent of married Gen Xers admitting that financial issues cause stress in their relationship. “When asked how they would rate their financial health, slightly more than 41 percent of Gen X said it’s not very good or not good at all. That’s worse than millennials, 37 percent of whom said the same. More of Gen X than the millennial generation also think their finances are much worse off somewhat worse off than their peers — about 43 percent compared to 36 percent. Gen X is also less likely than millennials to think they earn more than their peers and more likely to think they earn less,” according to Business Insider.
Between 2010 and 2016, the median wealth of Gen X households was recorded at US$84,200 compared to US$63,400 in 2007. In contrast, the wealth of Boomer and Silent households continued to remain below 2007 levels. Gen X home equity doubled since 2010. Almost 15 percent of them were considered “underwater” in 2010, meaning that they had more debt than assets. By 2016, the number plunged to just 3 percent. But despite being in a better financial position than they were in the aftermath of the Great Recession, Gen X is in a worse financial position as compared to their millennial brethren.
The next crisis
When the next recession hits America, it seems as if it will be the millennial generation who will be the hardest hit. Most millennials have a huge burden of student loans. Combined with their lower earnings (as compared to previous generations), millennials have been rather slow in accumulating wealth.
Most Millennials have a huge burden of student loans. (Image: Darren4155 via Dreamstime)
“Millennials have put off saving and buying homes, as well as getting married and having babies, because of their crummy jobs and weighty student loans. A downturn that leads to higher unemployment and lower wages will force Millennials to wait even longer to start accumulating wealth, making it far harder for them to accumulate any wealth at all… Their trajectory, already terrible, might get even worse,” according to The Atlantic.
The percentage of U.S. citizens below the age of 35 who own stocks fell drastically from 55 percent in 2001 to just 37 percent in 2018. Almost two-thirds of millennials have zero retirement savings.
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