Quite apocryphally, Hovnanian Enterprises CEO Ara Hovnanian gets credit for one of the residential construction industry's most quotable quotes: “Home building is a 200-year-old tradition, unimpeded by progress.” As eloquent and astute as Ara may be, he didn't coin that phrase, but he certainly appropriated it in the right time and the right place.
By 2012, nevertheless, home builders may stumble, but one thing they absolutely can not do is remain unimpeded by progress during these downturn years, especially where it comes to learning to better make, market, and sell homes specifically for female buyers. If they disregard this issue, or fail to reckon with its importance, they will plop straight into an increasingly crowded dustbin of home builder history.
This date is a date with destiny, because it's the year that the vanguard brigades of Gen-Yers will start forcing their way into the ranks of home buyers.
What we know with certainty after watching home building, housing, and the economy each fall off a cliff amid robust fundamentals in corporate earnings, household and income growth, immigration, and consumer spending and confidence in late 2005 and 2006 is that demographics alone does not guarantee that business fortunes will grow. At the same time, misreading demographics can and does make businesses go away. Fast.
If we correct for the sins of real estate speculation and look beyond profit and loss spreadsheets for the past half-dozen years, we're left with people. We're left with neighborhoods. It's what home builders know and do. That's where the strength is, and that's where it can remain, sustainably.
What's changing, and changing dramatically, is the essential catalyst that made the big builder business what it has become: one of the driving forces of the global economy. Households. Let's make the case for change based on pure household composition trends.
According to geographer Richard Florida's newest book, Who's Your City?, here are some fast facts on how radically households are changing:
Florida adds, “These days, fewer and fewer people are marrying young—postponing marriage until their late twenties or thirties—and some choose not to get married at all. The upshot of this is that there is a much longer period of being unmarried, with additional flexibility and in some cases the necessity to find a place that fits.”
Bridging the Generation Gap [Download PDF]
Three other key observations come into play. First, nine out of 10 home purchase decisions are made by a woman. Second, according to Ketchum Global Brand Marketing Practice research, women account for $3.3 trillion in consumer spending, are responsible for 80 percent of household buying, control more than 50 percent of the wealth in the country, make 62 percent of all car purchases, and take more than 50 percent of all business trips. Third, Gen-Y math means that an 80-million-person cohort will make its way into the ranks of home buyers.
“Married couples are a shrinking share of American households,” the Harvard University Joint Center for Housing Studies says in its State of the Nation's Housing annual report. “Several trends have contributed to this shift, including higher labor force participation rates for women, delayed marriage, high divorce rates, low remarriage rates, and greater acceptance of unmarried partners living together.”