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.

The Rise of the Single-Person Household

As recently as the late 1950s, 80% of Americans taking part in a survey by the University of Michigan believed that people who preferred the single life were, among other things, “sick,” “immoral” or “neurotic.”  At the time, such pronouncements could be viewed as a product of their time, given that 70% of adults were married and divorce, when granted, was still viewed with eyes of suspicion.

Fast forward to today, however, and the rise of single living has become one of the most important generational changes of the last 50 years. According to the most recent Census Bureau statistics, just 51% of adults today are married, putting singles within shouting distance of becoming a majority cohort.  Moreover, 28% of the country’s households now include just one person, which has doubled since 1960 and is the highest in U.S. history.  And this trend isn’t just confined to the U.S. – single-person households account for 50% of the total in cities like London and Paris and even higher (60%) in Stockholm.

Although semi-hysterical books such as “Bowling Alone” and “The Lonely American” have portrayed single Americans as threats to wealth, well-being and longevity, New York University Professor Eric Klinenberg begs to differ.  In his new book, “Going Solo:  The Extraordinary Rise and Surprising Appeal of Living Alone,” Klinenberg, writing in Fortune magazine, argues that most people who live alone do so by choice, and this freedom is driven in large part by their higher discretionary incomes.

According to federal consumer expenditure surveys from 2010, singles spent an average of $34,471 per person, or 23% higher than married folks without kids ($28,017) and 49% higher than highest-spending families with children ($23,179).  In other words, take increasing numbers of singles, multiply that by their higher incomes, and what you get is rising economic clout that the Bureau of Labor Statistics estimates to be as high as $1.9 trillion.

While most corporations have been slow to take notice of this gradual demographic shift, there are certainly exceptions to the rule including Coldwell Banker, Lowe’s, Chevrolet and even the diamond merchant DeBeers.  Apparently they already know that singles are more likely to eat out, join a health club, take classes in art and writing, attend public events and volunteer in the community. Perhaps most important of all, single households also play a crucial role in revitalizing cities and giving life to public spaces, often as part of social networks called “urban tribes,” which often substitute for traditional families.

One major builder investing heavily in this demographic is The Related Companies. Last year, the company opened MiMA (“Middle of Manhattan”), a 63-story high-rise including luxury (and ultra-luxury) apartments, a 633-unit “Yotel” with its own bar scene and offering micro ‘cabins’ to rest and relax, an Equinox health club, outdoor screening space and three party rooms.  To make the project a cultural destination, Related brought in architect Frank Gehry to design a new multi-purpose space for The Signature Theater Company along with a café and a bookstore.  The idea is that residents here not need to venture off-site for a training session, a movie screening, a drink with friends or even an off-Broadway play.

Of the total 814 apartments available at MiMA, most are studios or one-bedroom floor plans, and nearly two-thirds of its occupants live alone.  Even with rents starting at over $3,500 per month, 90% of inventory was leased within six months.  It, too, will target not just another tenant but households with more than $100,000 in income who are seeking the lifestyle which revolves around one of their apartments.

Of course singles also buy homes, and that is attracting the attention of both brokers and builders.  Today, single households buy one-third of homes and, according to the NAR, unmarried men and women account for 10% and 21% of all buyers.  Interestingly, despite their higher incomes, men in their thirties and early forties show little interest in buying a home, while women increasingly look to homeownership as a way to graduate to the next life stage of total independence. Then, and only then, will many of them even consider partnering up with a significant other.

Given that single women living alone and age 18 to 34 years make up the fastest-growing demographic group – rising from 500,000 in 1950 to 5 million today – housing providers which target them with the right mix of floor plans, amenities and similar neighbors will likely be at the forefront of a trend that will be with us for some time.  For many, being single is a distinct advantage.