Between Generations, Housing Preferences Have Evolved
Over the previous few blog posts, the economic factors that are likely causing Generation Y’s lowered propensity to purchase homes was discussed. Declining incomes, higher costs of living, the unavailability of affordable homes and tighter mortgage qualifications all present significant obstacles to young adults’ ability to buy a home. Those were contrary to the majority of media reports which consistently attribute Millennials’ lack of home buying solely to preference, a gross over simplification of the current situation. Generational differences do have an effect, but it’s a much smaller effect than what has been common in public discourse.
The desire to own a house is another component of the declining trend in home purchase. Even if Millennials were in an identical situation financially as Generation X was a little over 10 years ago, and the housing and lending markets were on par, would they even want to purchase a home? Many Millennials might say homeownership doesn’t fit their culture and lifestyle.
In terms in culture, Generation Y is ushering in a shift in American demographics. The nation is becoming more diverse, and the Millennial generation, the most diverse in the nation’s history, is driving that change.
A component of the shift in the nation’s ethnic makeup is immigration. A cultural norm for many of those immigrating to the U.S. is for two or even three generations of family to live in the same household. That coincides with the younger generation’s propensity to live at home for a longer period of time – even into young adulthood.
Trends in marriage and child bearing are evolving as well. The median age that women and men are getting married has increased about two years to from 2005 to 2013 to about 27 and 29 years old, respectively. Meanwhile, the median age of women having their first child increased by about a year in the same period to 26 years old. Having kids and getting married is often a precursor for home purchase. And with those pivotal decisions being delayed, so will the age at which most Millennials decide that they want to purchase a home.
Along with evolving demographics and preferences, there has been a significant evolution in rental product being offered. Following the recession, a sizable portion of owner-occupied single-family homes were purchased by investors and turned into rentals. The increased supply kept rental options abundant and affordable.
Multifamily owners and developers have also gotten creative, offering a wider range of amenities. Some of the new amenities are targeted at young renters. Those include community car washes, dog parks, larger common areas, attached yards, attached garages and mixed-use buildings that offer trendy retail, restaurant and other entertainment options on the ground floor. Mixed-use buildings and the larger urban environments in which they’re often nestled provide a live-work-play atmosphere that is attractive to young adults. Many more urban renters feel that the location and amenity combination along with the flexibility of a short-term commitment to outweigh the benefits of homeownership.
Demographics and product offerings will certainly continue to evolve. That could pose a challenge to demand for-sale single-family housing going forward.
Comparing Gen Y’s home buying trends to previous generations at the same life stage is not a good assessment of their preferences, because several factors have changed too significantly to make the comparison relevant. These factors have combined to put the generation at a disadvantage in the housing market. Whether the Millennial generation will start buying homes at the same rate as previous generations is debatable, but it will likely hinge on the evolution of some of the variables mentioned in this series.
(Image Source: Shutterstock)