Austin-based consultant Tim Smith writes about Gen Y and other economic topics for his Echo Boom Bomb blog. He regulary works with companies hoping to market products and services to reach this massive demographic of 80 million. Here, he talks to Multifamily Executive about why this generation is changing the face of the housing market and how developers can appease them.
MFE: How are millennials influencing the housing market right now?
Smith: When I studied Echo Boomers, I found some of them are in a position to buy homes. You were probably looking at 13-20 percent in 2010-2011 who were in a position to buy homes, out of approximately 80 million Echo Boomers. At most, that was 16 million homeowners. While working for Wells Fargo, I found that approximately 27 percent were living in with relatives over the same time frame, so approximately 60 percent were renting. Granted, now that we're in 2012, circumstances may be a little different. Echo Boomers rent in creative ways: for example, they might be living with nine other roommates or renting out a room in a house or apartment, depending on their financial circumstances.
MFE: How are student loans influencing housing choices for Gen Y?
Smith: The No. 1 way is that a lot are living with relatives, approximately up to one third. Some are getting apartments, some are getting homes. But as I said, this generation is much more creative in how they are approaching their current housing situation.
MFE: What can multifamily developers do to appease Gen Y renters?
Smith: The thing I would keep in mind is to build apartments and housing near social businesses, like coffee shops, restaurants, etc. These areas attract many young people, and some of them even work in these locations. By doing this, you do two things: save young people money in terms of transportation, and save them time. A few real estate developers did this in Lubbock Texas near Texas Tech, saving college students–who are often the most financially restricted–a lot of money. But this also helped attract other Echo Boomers who didn't attend Texas Tech.
MFE: Is it more economical for Gen Y to rent or own a home?
Smith: It really depends on their circumstances. Homes in Texas cost much less compared to homes on either coast. With all the maintenance time and cost of owning a home, property taxes, insurance costs (rental insurance is cheap), and interest on a mortgage, owning a home can be a major, and unnecessary, cost. As far as moving to a cheaper area, be careful: an increase in income does not mean that the cost of living remains the same or decreases. Very few places can offer a competitive salary while offering a similar or lower cost of living (Texas being a good example of this relative to New York, California or Florida).