Sunday, December 16, 2012

Demographics as Destiny: How the Changing Country Will Impact the Housing Market

"The times, they are a-changin’.”

When Bob Dylan penned those words back in 1963, the country was embarking on a generational political and social upheaval that would come to define the next decade, especially for civil rights, voting rights and a national safety net.  At the same time, the demographic make-up of the country in the 1960 Census was still quite traditional:  over 88% Caucasian, 19% foreign born, 70% lived in cities, 63% owned their own homes, 69% of men were married, 65% of women were married and the average family size was 3.65 persons.  Total population:  183.2 million.

By the 2010 Census, five decades of gradual shifts in immigration, the rising financial independence of women in the workplace, expanding urban boundaries and relaxed social mores on divorce gave us a country a bit different from 1960:  about 72% Caucasian (64% non-Hispanic whites), 13% foreign born, 81% lived in cities, 65% owned their homes, 51% of men were married, 49% of women were married and the average family size was 3.14 persons.  Total population:  308.7 million.

By 2050, the Census Bureau is projecting a total population approaching 430 million, with 60% of this increase due to immigrants and their children.  That’s mostly because the U.S. has entered into what’s known as a ‘baby bust,’ in which the domestic birthrate is not high enough to replace the population.  In fact, according to a recent Pew Research Center study, the 2011 birthrate of 63 births per 1,000 women of child-bearing age was the lowest ever recorded -- and nearly half the rate noted at the height of the Baby Boom.  Since a growing economy and entitlements such as Social Security and Medicare rely on younger workers participating in the workforce, we’ll have no choice but to embrace ambitious people from other countries -- and of course they’ll need somewhere to live.

The reason I’m citing these statistics is because the election results of November of 2012 starkly revealed ongoing socio-economic and political shifts that had been quietly occurring in the country for decades (even if some insulated politicians and pundits never got the memo).  Besides re-electing the first African-American President in history, voters in two states approved gay marriage while those in two others said they were ready for legal marijuana use.

While you could argue that the main Presidential argument was about tax reform and entitlement spending, in other ways it was arguably the most progressive election of my lifetime and, like it or not, foreshadows more changes to come that the nation’s builders have already been addressing for years.  Today, because that means everything from Milliennials demanding sustainable living to single women who telecommute from home offices, the way in which the industry markets, merchandises and sells the latest models will differ for each specific audience.

The largest cohort is actually the Millennials, 80 million strong and born largely between 1983 and 2000.  With the older ones eyeing large student loan payments and having lived through the financial meltdown, many are not yet ready to make the plunge into homeownership.   Still, a FannieMae survey reports that 90% of them want to eventually own a home, and over 40% want to live in a close-in suburb where transportation options abound.

Another huge group is the Baby Boomers, who number over 75 million people and control the vast majority of the country’s personal wealth, as well as account for half of consumer spending.  Over one-third of these people (and over 40% of younger Boomers) plan to move somewhere else for retirement, and cite healthcare and cost of living as their most important considerations, followed by a better climate, proximity to family and networking opportunities in order to keep socially engaged. They are now retiring at the rate of about 10,000 persons per day.

One key external group includes immigrants, who are more likely to demand homes which can accommodate multiple generations.  Considering that foreign-born persons are much more likely to live with other generations than those born in the U.S. (24.6% versus 15.5%), builders will have no choice but to address the 50 million or more immigrants expected to move here over the next 40 years (half of whom will likely come from Latin American countries).

Within those groups -- as well as the smaller Generation X -- builders will also have to carefully craft their messages to single women (who are almost twice as likely as single men to buy a home) and non-traditional couples or families who will demand the same things as everyone else:  a safe place to live, grow and prosper.

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