Millennials love Home Depot, survey says

As millennials mature and increase their earning and spending power, Wall Street is starting to pay more attention to this generation's consumer behavior. A new Bank of America survey about home ownership reveals some surprising millennial trends and suggests Home Depot Inc (NYSE: HD) could benefit big from them.

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Analyst Elizabeth Suzuki says investors may have some preconceptions about millennials and homeownership that might not actually be true. Suzuki says the Bank of America survey of 1,000 millennials busts several widely held myths about these young professionals and home ownership.

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Contrary to popular belief, the survey found that only 13 percent of millennials currently live with their parents. The survey also contradicts the belief that millennials prefer to live in an urban environment. Just 29 percent of millennials ages 31 to 35 live in an urban area, and only 39 percent of younger millennials ages 26 to 30 live in an urban setting.

The survey revealed no major financial barrier is keeping millennials from owning a home. The home ownership rate for millennials surveyed was 40 percent, up 6 percent from a year ago. Another 18 percent of those surveyed said they are "extremely likely" to buy a home within the next two years.

Millennials also are not shying away from older homes. Nearly half of those surveyed said they plan to buy and renovate an older home to save money.

Most important for Home Depot investors, the Bank of America survey revealed that millennials still prefer to do their home improvement shopping at brick-and-mortar stores such as Home Depot.

"The millennials we surveyed still overwhelmingly purchase most or all of their home improvement products in-store, although online transactions are gaining some traction," Suzuki says.

When millennials were asked which was their first choice for home improvement shopping, Home Depot (64 percent) took the top spot, followed by Lowe's Co. (LOW, 53 percent), (AMZN, 46 percent) and Walmart (WMT, 36 percent).

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"Across nearly all demographics, respondents preferred HD to LOW, with the exception of rural customers, which is not surprising given that LOW's stores skew more rural than HD's," Suzuki says.

Suzuki is bullish on both Lowe's and Home Depot, but Bank of America rates Home Depot as the lower-risk play for long-term investors. The firm has a "buy" rating and $215 price target for HD stock.

Copyright 2017 U.S. News & World Report