Millionaires, Millennials And The Great Avocado Debate

It was a week of controversy for the ages – battle lines were drawn, allegiances were declared and ad hominem attacks were spewed on Twitter.

No, we’re not talking about the appointment of the Special Prosecutor to investigate the firing of James Comey. No, we’re talking about the real debate in America and the answer to the most important questions facing our nation today.

Are millennials eating too many avocados on toast for their own good?

Do those between the ages of 20- and 35 love the rich green fruit so much that it is limiting their economic potential as a generation?

The crux of the debate is this: are first- time home sales down because, given the choice of a two car garage and a yard in the suburbs, millennials have, en masse, decided they’d rather enjoy a more richly-delicious brunch experience, week in and week out?

Some of our readers are doubtlessly confused, having missed 60 Minutes last week and and/or having spent the majority of this week not on Twitter. For most of us, there is not obvious connection between avocado toast consumption and the macroeconomics trends observable in Gen Y. But most people aren’t Australian millionaire and property mogul Tim Gurner, who made headlines this week after comment he made on Australian 60 Minutes about millennials and their spendthrift ways.

“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” Gurner noted.

His statement, unsurprisingly, managed to kick up more controversy than the normal segment on Australian 60 Minutes – as people worldwide noted that given the various economic difficulties millennials face – it is a bit much to begrudge them a few slices of avocado on bread.

So what exactly was said – how did the blow-back shakeout – and just exactly how much avocado toast would one have to give up to buy a house?

Well…

Champagne Tastes – Beer Budget

Gurner is not a generic hater of all things avocado, nor all things toast – his broader point was the millennial generation has come to expect a lifestyle level that is mismatched to what their actual earnings picture is. What he disputes is that millennials – and their diminished economic prospects when compared to other generations – have been less the victims of bad circumstances and more the victims of their own bad decision making around indulging their highfalutin desires.

“We’re at a point now where the expectations of younger people are very, very high,” Gurner said. “They want to eat out every day, they want to travel to Europe every year. The people that own homes today worked very, very hard for them, saved every dollar, did everything they could to get up the property investment ladder.”

And while Gurner got an awful lot of attention for his remarks – more on that in one second – it should be noted that he is far from the first person to make this observation. In fact, he isn’t even the first person to center his argument on avocado toast – the consumption of which, along with other fancy toasts, has apparently has risen to irritatingly endemic levels in Australia.

Bernard Salt, a columnist for The Australian columnist , has also had enough of people consuming their potential down payments as part of Sunday brunch.

“I have seen young people order smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop and more,” he wrote “Twenty-two dollars several times a week could go towards a deposit on a house.”

And while one might be tempted to wonder if his editor removed the line “and so grow up” from that set of statements- the observation without reference to what people to choose to eat for breakfast was made much in a much less cranky sounding – and hence much more popular fashion by Tim Urban on the popular Wait But Why Blog in his article on why generation Y yuppies are unhappy – as told through the character Lucy, who despite her great education and decent lot in life is miserable

“Lucy’s extreme ambition, coupled with the arrogance that comes along with being a bit deluded about one’s own self-worth, has left her with huge expectations for even the early years out of college. And her reality pales in comparison to those expectations, leaving her “reality – expectations” happy score coming out at a negative.”

However, while the observation about the younger generation was not entirely new – it did managed to get the internet’s intention, in a big way.

The Backlash

Crushed under the weight of trillions of dollars in student loans, having entered the workforce during the worst recession in 60 years and facing being the first generation of Americans to earn less than their parents more often than they out-earn since World War II – millennials en masse were less than enamored with the suggestion that brunch is their issue.

“What is the relationship between my avocado consumption and my failure to purchase a $900,000, 300-square-foot studio in Brooklyn?” asked the writer of an Open Letter printed in GQ.

“For you see, two things are true about me, a typical pea-brained millennial who owns 37 credit cards and who shares a two-bathroom apartment with seven roommates in a crumbling building next to an airport tarmac. The first thing that is true is that I occasionally pay between 7 and 13 dollars for a slice of avocado toast at brunch. The second thing that is true is that, in my 3 years in the workforce, I have not been able to scrape together the $600,000 that is necessary to place a winning bid on the cheapest apartment in New York: a dilapidated 0-bedroom crawlspace in a haunted insane asylum on a Superfund site.”

Twitter had a host of similar observations.

“I was going to put a down payment on a house, but then I spent $44,000 on avocado toast instead.” note another

“Brb quitting my job and becoming an avocado peddler since millennials are spending the equivalent of house prices on them,” noted one user.

“My generation loves brunch because it’s two hours of distraction from the fact we’ll never own real estate,” noted a third.

We could go on all day – but as the week wore on, even serious mainstream news sources like the Washington Post were noting that perhaps writing off Generations Y’s failure to launch in some cases isn’t easily explained away by terrible spending habits. Though we have a long history of blaming trendy food (ten years ago Starbuck’s lattes were preventing us from being financially responsible) the reality is millennials student loans, lower wages, urban orientation when combined with the rising costs of start homes and the up ticking interest rates are the much better explanation for why home ownership remains out of reach.

“So, eat that avocado toast, millennials, and enjoy it. Because, let’s face it: you’re never going to be able to buy a house anyway,” noted the Post’s Maura Judkis.

Cheerful.

But…

Never Is A Long Time

So how much avocado toast can one give up and buy a house? Depends on where one wants to live. If it is San Francisco or New York – the two markets in the U.S where one is most likely to buy avocado toast, the answer is… an awful lot.

San Francisco’s average avocado toast price is around $9; the the median price of a home? $1,185,000. To qualify for financing with 20 percent down (difficult on such expensive buys that often attract cash buyers in the Bay Area), the needed down payment is $237,000.

That would require skipping 26,333 slices of avocado toast slices, or 72 years’ worth of skipping it at breakfast.

New York City’s avocado toast is more expensive on average at $10 a serving – but the median home price is only $1.1 million, meaning it would only take 60 years to save the funds for a down payment on a home by skipping the avocado toast.

This, of course assumes that real estate prices in both cities will not go up or down over the next 6-7 decades.

Okay, so changing their breakfast habits is probably not going to do it – though it might still be a bit early to conclude millennials are never going to own homes away. There are real estate markets in the U.S. that are not New York or San Francisco – where the median home price is not measured in seven digits.

And first time buyers not looking for million dollar homes can use the FHA program – where the down payment requirement fall to the 3 percent to 5 percent range, which requires several fewer decades of skipping the avocado toast, particularly if one buys in a market where prices are closed to the national median 2017 sale price of ~$300K or the national 2017 sale price average of ~$375K.

Those aren’t small down payments but they don’t quite equal ‘never going to happen,’ either.

So the good news this week is that millennials are probably good candidates for buying houses – although million dollar homes in the most expensive real estate markets in the U.S. may remain out of reach for all but the wealthiest of them.

And they may even be able to afford to keep eating avocado toast while they save – depending on where they move. But maybe instead of buying them out, they could make them at home.

There’s probably an app for that.