SEVENTY-SIX MILLION AGING BABY BOOMERS MAY PROVE that a rare phenomenon known as “the second chance” may exist in the new home building business. Still, no high can compare with the one big builders feel when they know they're getting it right with the four out of 10 home buyers who take hold of their deed at entry level—the American Dream's initiates.

For big builders, the macro-economics and demographics of the entry-level home buyer market are entering a critical 10-year window, a generational changing-of-the-guard, and a time for reinventive home designs and solutions. First-time buyers have a median age of 32, earn a salary of about $54,400, make a 3 percent down payment on a home that costs $139,000, and will own a home for six or seven years, on average. About 40 million people move each year, and among those movers, every eight seconds a young “wants-it-all” adult from a new generation, Generation Y, enters the age range that hosts the greatest pool of people new to home-ownership: ages 25 to 35. On top of that, every 26 seconds, an international migrant arrives on these shores, highly likely to be a young adult. So, of the 300,000 to 400,000 families each year who buy new houses from big builders, the greatest proportion by far are entry-level home buyers from that 25- to 35-year-old group. It's a market to get to know well.

Amid all the unpredictables, several things are certain: Households will become increasingly diverse in age, gender, race, and ethnicity; emerging technologies will change the way people live; and because young adults are blitzed out by mass marketing, traditional ad messages won't survive indefinitely.

“What you typically have up your sleeve as a business professional, chances are this savvy segment has already seen it,” writes David Morrison, founder of the Philadelphia-based marketing firm Twentysomething, in his new book Marketing to the Campus Crowd. “Repeatedly.”

Having It Their Way Morrison says today's young consumers aren't like their parents. For starters, they're less bound by traditional notions of home. They've grown up watching MTV profiles of musicians, actors, and athletes whose houses are idiosyncratic and fun. So they're making their own homes a place to play. “I've heard of young people turning the garage into a skate-board surface, a fourth bedroom into a home theater, or taking a high-ceilinged room and turning it into a basketball court,” Morrison says. “Some people are wiring their house for a home office that's higher-tech than the office they go to at work. Customization and self-expression are what matters.”

What's more, attitudes toward diversity and opportunism have evolved as the racial, ethnic, and lifestyle palette of the market has changed. Generation Y does “have a positive outlook on the future, a sense of confidence that they'll make things happen their way,” says Barbara Caplan, a partner at Chapel Hill, N.C.-based research consultancy Yankelovich.

Technology is key in shaping Gen Y's can-have DNA. Thanks to the Web, entertainment is at their fingertips, and they come to most products and services knowing what they want. “They are used to digital everything. That makes a big difference in how you process information and how you allocate dollars in the home,” Caplan says. That's also why the eBay-surfing Gen Y has far less baggage about how a house should function. “Intangibles mean more to them—the experience of some fantastic aspect of a home; and they want to frame it, shape it, direct it,” Caplan says. “A package is not necessarily going to cut the mustard.”

Getting It Right This generation grew up with Target and Ikea, retailers who are able to deliver hip-looking products to the masses, notes Catherine Stellin, vice president of Youth Intelligence. “About-to-bes” expect that kind of excitement to carry over to a big-ticket item like a house. “The idea of being able to buy a spec house that's an interesting design is important to young adults,” Stellin says. “They would rather have something that's sparse and nice than the traditional tract homes we all grew up in.” That attitude helps explain the groundswell of popular interest in the new crop of prefabricated houses, which offer the cachet of customizable features in a single sophisticated package.

These finicky customers are being courted by an increasing number of builders. In downtown San Diego, Barratt American introduced an ad campaign for a new eight-story building around the cool-within-reach concept. (Unit prices range from the high $200,000s to about $500,000.) One brochure shows a martini glass and a disc jockey, and a tagline reads, “Priced for a Starving Artist, Fit for a Trophy Wife.” Lenette Hewitt, vice president of sales and marketing for Barratt American, says it's about the nightlife. “We don't call them units or homes, we call them cool pads,” she says. Gifts such as a martini set and a hand cart for toting groceries are dispensed at move-in events. “We get that they don't want to live in a suburban neighborhood in a cul de sac,” says Lenette Hewitt, Barratt's vice president of sales and marketing. “They work hard and play hard.”

Within the past year, product manufacturers have also begun to offer brighter, edgier materials that are both stylish and a good value. One of Moen's hottest bath accessories, less than a year on the market, is a decorative tank lever priced between $15 and $20. Though they weren't developed with a specific buyer type in mind, senior product and brand manager Tim Bitterman says they add seduction to the shopping experience.


Learn more about markets featured in this article: San Francisco, CA.