Who Will Buy Homes in the Future?
One of the biggest challenges for builders in future years will be adapting to changes in the types of people buying homes. The percentage of households in the home building industry’s sweet spot—growing families—will contract. The biggest growth will be among the youngest, who may further delay marriage and child rearing, and the oldest, who may behave differently in retirement and semi-retirement than previous generations. Both young and old buyers may tip the scales in favor of smaller homes in the future, though those decisions will also be influenced by wealth and other economic dynamics.
All eyes are on Gen Y (born in the 1980s and 1990s), who could potentially have a bigger impact on home building than the vaunted Baby Boomers. Why? Because there are 8 million more Gen Yers than Boomers, for one thing. The problem with determining the direction in which they will push and pull housing design and production is that they aren’t having much of an impact right now.
The bulk of this new generation only graduated from college two years ago. They are saddled with big college debts that will take a while to pay off. Then they’ll have to save some money before they buy a home. Many of these graduates are cooling their heels in their parents’ homes, or they are living in a group home or apartment, often subsidized by their parents. But when these youngsters finally get around to getting a place of their own, it could be big. “There [may] be more first-time home buyers in the market in 2013–2018 than ever before,” says Hewlett of RCLCO.
The early data on aging Baby Boomers reveals a different animal than the Eisenhower Generation. Recent steep losses in home equity and wealth have upset retirement plans, for one thing. Hewlett believes we’re likely to see more Boomers in “semi-retirement, with second careers, and continuing education.” At the very least, he says, “retirement is likely to look very different than in the past.”
Aging Boomers may want some of the same things sought by previous generations of active adults—maintenance-free homes, active social agendas, and close proximity to shopping, health care, entertainment, and exercise. But the settings in which they find these things are likely to change. Instead of creating large, highly amenitized communities, developers may be better off creating smaller enclaves—some age-restricted, others design-targeted—close to suburban hubs.
The other big change rolling down the pike is the growing influence of immigrant households. RCLCO estimates that 73 percent of population growth between 2010 and 2020 will be non-white. Already, 17 of the 100 largest metro areas are “majority minority.” By 2035, minority households will account for nearly half of all U.S. households.
Builders will need to rewrite their marketing and advertising messages to appeal to an increasingly diverse buyer population. And a rise in multigenerational families, stemming from the growing Hispanic population, may require larger homes with a higher bedroom count and a new generation of floor plans.
The growing prominence of single buyers, though, may offset any trend toward increased new-home sizes. (The size of new homes started by contractors has dropped from about 2,270 square feet in 2006 to about 2,120 square feet last year.) Joint Center projections show that persons living alone will account for the largest share of future household growth. More and more Boomers will find themselves widowed or divorced. And many young people will move out on their own, before they marry.
At some point during the decade, though, strong demand is likely to return from married or partnered couples with children. Nature will take its course; young people will marry and have children. That favorable demographic will play to the strength of builders who cater to family buyers.
Go to http://go.hw.net/burning_issues_2011 to view videos and PowerPoint presentations from the Housing Future Summit.