Generational Shifts in Home Buying: A 2015 NAR Report Reveals Interesting Insights

Recently, the National Association of Realtors® released their 2015 Home Buyer and Seller Generational Trends report, which analyses the differences between recent home buyers and sellers of various age groups. The report is chock full of interesting insights, such as the continued importance of partnering up with a real estate agent for younger buyers even after having done considerable research online.

Moreover, as the housing market continues to emerge from the Great Recession, one trend has been made abundantly clear:  Despite the considerable headwinds facing Generation Y as they came of age often saddled with student debts, car loans, stagnant wages and tighter mortgage standards, they have continued to persevere, and in 2015 accounted for the nearly one-third of home buyers.

At the same time, Baby Boomers accounted for almost as many sales (split among 16 percent younger Boomers and 15 percent older Boomers), while Generation Xers followed behind at 27 percent.  The Silent Generation accounted for just 10 percent of recent sales activity.

Lawrence Yun, NAR’s chief economist, believes that the survey once again underscores the still-untapped demand for owning homes among young adults, reporting that over 80 percent of both Gen X and Gen Y buyers view their home purchase as solid investment.  As opposed to renting in today’s market -- in which tenants can expect to see annual increases of three to five percent -- they’re counting on the predictable, fixed payments made available by a traditional mortgage.

Of course selling to these different generations also requires a more customized approach than we might have seen in years past, in which the same traditional sales office, model home complex, well-crafted brochure and robust Web site could market just as effectively to distinct age groups.

For example, although 65 percent of married couples buy today’s homes (with another 8 percent of unmarried couples making the plunge), single women are almost as twice as likely to buy a home than their male counterparts.  However, given that 65 percent of all buyers do not have children, forcing them to choose among resale homes in suburbs originally designed mostly for families can often be a marketing challenge.

In addition, the rising importance of multi-generational homes -- accounting for 13 percent of recent sales -- has seemingly risen in lockstep with a higher share of foreign-born buyers, especially to middle-aged heads of households born in the 1970s.  However, given that 70 percent of buyers continue to choose suburban locations, it seems that many want to leave their options open, whether that means future children, a grown child moving back into the home, or aging parents and in-laws who may need additional supervision from family members.

Today’s buyers also rely much more on the Internet to conduct their own research, ranging from about one-third for older buyers to just over half for those under age 35.  What this means is that by the time a potential buyer visits an open house or a model complex, they’re probably not looking for information they already know -- they’re seeing if the photos and marketing verbiage matches the reality of seeing it in person, as well as how knowledgeable and trustworthy the sales agent seems.

Moreover, given that more than half of both Generation X and Y buyers started their home search on smartphone devices (with about 25 percent ultimately finding that new home in the same way), it is critical for builders and agents to optimize their Web sites for mobile users.

For younger buyers under age 35, they bring their own unique wish list, such as a premium on convenience to their jobs, a desire to avoid renovation headaches (which bodes well for newer homes if they can afford it) and a need for low down payments.   Yet because of that affordability issue, it’s often those same younger buyers opting more for older homes out of necessity.

For older buyers such as Baby Boomers, when they move it’s often to a smaller home, even if they’re not ready for retirement, and if they’re looking for a freer lifestyle with less home maintenance, new homes with community amenities continue to be quite popular, especially if they plan to stay there for 15 to 20 years.

Finally -- and not surprisingly -- the older the buyer, the less they’re willing to compromise in terms of price, size and condition of the home.  And who can blame them?  After a lifetime of catering to family needs and wants, a low-maintenance home with a view seems like a pretty nice reward for a life well lived.

Marketing to Millennials: Buying a home or a car not yet a priority

For several years now, we’ve been hearing about how to market to the Gen Y cohort, also known as Millennials or Echo Boomers.  Sure, they’re attracted to technology and sustainability, but what if their attitudes about owning things like cars and houses are completely different from the generations which preceded them?  According to a recent story in The Atlantic magazine, it’s possible that a perfect storm of economic and demographic forces have altered the very way that this generation participates in our consumer culture, potentially changing how we develop and build housing in the years ahead.

For those of us who remember driver training classes in high school, getting that license meant gaining independence, demonstrating responsibility and embarking on adventures outside of the local neighborhood.  But that was then, and this is now. Back in 1985, adults in the 21-34 age range bought 38 percent of all new cars sold, but by 2010 that capture rate had fallen to 27 percent.  While more people could be simply buying used cars, the proportion of teens with a driver’s license fell by 28 percent between 1998 and 2008.

Enter the sharing economy, in which companies like ZipCar, Airbnb.com and thredUP allow members to share, rent or sell goods which would otherwise simply sit idle.   Yet according to a ZipCar survey, it’s been the evolution of the smart phone – yes, the smart phone – which has somewhat replaced the car both as a status symbol and as a way to stay connected to the outside world.  At the same time, the connectivity of those same smart phones has symbiotically energized a sharing culture which relies on technology.

When it comes to housing, however, the sharing economy has had a lot more to do with The Great Recession and steep student loan bills than technology.  According to Harvard’s Joint Center for Housing Studies, between 2006 and 2011 the homeownership rate among adults under 35 fell by 12 percent, and another two million had boomeranged to live back with their parents.  A report from the New York Federal Reserve showed that just 9 percent of those aged 29 to 34 were approved for a first-time mortgage from 2009 through 2011.  Nonetheless, a recent FannieMae survey reported that 90 percent of Millennials still aspire to owning a home someday even as they contend now with low savings, low pay and tighter lending standards.

So, over the next decade, as a group of people of over 35 million begin to form households, where will they live?  According to a 2007 survey, 43 percent of Milliennials would prefer a close-in suburb where both the need for cars and the size of homes can be smaller as a trade-off for proximity to reliable public transit, shopping and entertainment options.  One great example of this would be the redeveloped Culver City, CA, which, besides being the home of Sony Pictures, has become a trendy spot for restaurants and bars, and will now be more accessible with the recent opening of Phase I of the light rail Expo Line (which promises to whisk riders to downtown Los Angeles in less than 30 minutes).

Places like Culver City offer up what’s called “urban light,” which blends the best of suburban attributes like good schools and safe streets with the efficiency of smaller residences connected to a town center with a transit stop.  Although there will still be great opportunities for builders and developers, they will have to continue evolving along with their customers.  This will likely mean fewer suburban tract houses in favor of well-designed flats, semi-private townhomes and small homes which preserve the functionality of single-family living in a denser environment.  It will mean more households opting to rent than buy – at least in the short to medium run.

Nonetheless, on a larger scale, this gradual shift to higher-density living could have profound impacts on the entire economy, chiefly productivity.  For example, research has reportedly shown that doubling a community’s population can increase economic output by 6 to 28 percent, and that half of the variation in per-worker output between states can be largely explained by density.  Moreover, by spending less on housing and cars, consumers will have more money left over to save or spend on education, thereby making them more nimble for a global and largely knowledge-based economy.  This industry could thus have an outsized impact on the future:  by deliberately encouraging Millennials to live closer together and share their ideas (as well as their cars and extra rooms), America could regain its economic strength for generations to come.