Emerging Market Represents a New Departure for Housing
Looking beyond current housing market doldrums, speakers at PCBC in San Francisco on June 17 pointed to demographic forces taking shape now that will transform housing demand within the next few years, presenting encouraging new opportunities for builders who are ready to respond to fast-changing consumer preferences.
The most notable force in the emerging marketplace will be members of the echo boom, or Gen Y, who are roughly in their teens and 20s and largely the children of the 75 million Americans born during the post-World War II baby boom. Although the parameters of this age cohort vary a bit according to who is defining it (the generation’s birth years are 1981 to 2000, according to Harvard’s Joint Center for Housing Studies), there is a consensus that it outnumbers boomers by at least a few million, accounting for a full 30% of the U.S. population.
While the older members of this group are currently renters for the most part, they will soon be shopping for a home to buy, said Terrye Underwood, senior principal for RCLCO, and “a phenomenal wave is about to hit us” by around 2012.
Members of Gen Y are the most connected generation in history; they’re productive and highly efficient; they don’t compartmentalize work; and they are known to be civic-minded, said Underwood. Survey research finds that 60% of them feel personally responsible for making a difference in the world and 80% were volunteers during the past year.
Gen Y households will be looking for authentic values in marketing, she advised, but even more importantly they will have new attitudes about housing and the places they choose to live, she said:
- Forty-one percent say they expect to start out renting for a few years.
- Close-in neighborhoods are the choice location for Gen Y households; that’s followed by the city, especially for those in the South, but not so much for those in the Northeast.
- A community where they can reach work, shopping and entertainment on foot is important to two-thirds of those surveyed, and one-third said they would be willing to accept less space in exchange for that kind of proximity.
- Seventy percent said they do not believe they will have to move to the suburbs to accommodate the needs of their children once they have them, and only half believe that children need to live in a single-family home. Improving schools is given the highest priority.
- Diversity is key for members of Gen Y; they are the most culturally diverse group in the nation’s history.
- Green features are important to half of those surveyed, whether renting or owning.
- Thirty-five percent said they preferred a single-family detached home on a small lot, 31% a single-family home on a larger lot, 11% a condominium unit and 10% a townhouse. About 34% overall expressed a preference for attached housing.
- These young families are willing to sacrifice yard size to get what they want, but not the quality of the home.
- Members of Gen Y are looking for an environment that supports fluidity between home and work and “portable careers” in which they are able to complete a multitude of tasks.
- Libraries, restaurants, a Main Street village and recycling and fitness centers are all desirable amenities for this demographic.
The product that Gen Y households will buy, said Underwood, will be smaller but will make up for what it doesn’t offer in size with innovative, affordable design. The existing suburbs will need to evolve, she added, with the development of more walkable areas and town centers.
Looking for Like-Minded Active Adults
Toward the other end of the generational spectrum, Ken Warner Johnson, vice president of strategic marketing for Pulte Homes, said that builders can expect to see some vigorous signs of life in the 55+ housing market five years from now.
Prospective customers have largely put their dream of retiring to active adult communities on hold, Johnson said, because of falling home prices, the inability to sell their current home, vanishing retirement savings and weak consumer confidence. With these home purchases postponed, however, builders can expect to see growing signs of pent-up demand as today’s hard times start to brighten, he said.
And “some are taking advantage of weak prices to buy retirement homes now,” said Johnson.
While 71% of 55+ households currently live in the general population, and 29% live in communities where most of the people are 55+, Johnson said that living amongst like-minded people is a strong motivational force.
“The desire to affiliate with unfamiliar people decreases with age,” he said, and as they age, many members of this group tend to want to flee from diversity. “There is a comfort in familiarity,” he said. Their attitude, he said, is “I enjoy not having to explain myself to another generation.”
About 50% of the residents of Sun City Anthem in the Las Vegas area are currently working full- or part-time, he said, up from about 42% 10 years earlier, and their median age last year was 63, up from 60. “They are working longer, but they don’t have dull lifestyles,” said Johnson, with 100 different clubs or activities to join at a Del Webb active adult community.
Homes that sell to the 55+ market have space for a home office and a dual master suite, he said, and they are sustainable, especially when it comes to energy efficiency and recycling.
There is an increased preference for age-qualified product, he said, that fulfills the desire of being surrounded by people like themselves. Health and wellness, proximity to family and friends, life-long learning opportunities and the ability to volunteer and provide legacy leadership to share experiences and solve problems for the younger generation are all considered desirable in the community that 55+ residents are seeking.