Forget millennials and boomers for a second. While they're quite large, these two groups might not be the buyers to focus on, at least for the time being. There's mounting evidence that we've largely seen the end of the entry-level home, the product Gen Yers would be most likely to purchase. Meanwhile, more boomers are choosing to age in place, turning to remodeling rather than moving.

Who does that leave as the demographic to target in markets with constrained supply and a lack of affordability? Perhaps it’s time to reconsider Gen X.

The 'Middle Child'
Generation Xers, typically characterized as those born in the mid '60s to the very early '80s, aren't always considered an important cohort when it comes to builder target audiences. Yet, a look at the top 10 cities attracting Gen Xers, according to RealtyTrac, tells a different story.

Big builders' sales to Gen Xers improved in these markets between 2013 and 2014 and continued to remain steady last year. Also important: Gen Xers are willing to pay more in these MSAs.

Moreover, the top five of the 10 metros drawing Gen Xers are experiencing robust new-home sales. In fact, Atlanta and Charlotte, N.C., tied for No. 2 on RealtyTrac's list, both finished 2014 in the top 10 for number of new-home closings. And each of the top five, which also include Raleigh, N.C. (No. 1), San Jose, Calif. (No. 4), and San Francisco (No. 5), have experienced growth in annual closings since 2012. Also in all five, new-home buyers ages 35 to 44 and 45 to 54 paid a higher median new-home price in 2014 than buyers ages 25 to 34 and 55 to 64 (see chart below). The highest jump occurred in the San Francisco market, where buyers ages 35 to 44 paid a median new-home price 26.25% higher than buyers ages 55 to 64.


Source: Metrostudy


Below, we take a look at builders running the show in these five Gen X magnets.

1.       Raleigh-Cary, N.C.

2014 Top Five Builders

Closings

Lennar

458

Standard Pacific Homes

338

M/I Homes

327

Pulte-Del Webb-Centex

303

Dan Ryan Builders

266

RealtyTrac ranks Raleigh as the No. 1 Gen X market, where the group makesup 18.54% of the population, according to 2013 American Community Survey data. The market boasted a slight increase in annual new-home closings in 2014, at 4.8%. The overall median new-home price in Raleigh last year was $281,600, but buyers ages 35 to 44 paid a median new-home price of $298,800, which is 12.20% higher than buyers ages 25 to 34 and 17.64% higher than buyers ages 55 to 64. Lennar led closings in the market, with 458, a number that may yet be revised upward over the next few months.

2.       Atlanta-Sandy Springs-Marietta, Ga.

2014 Top Five Builders

Closings

DR Horton

1,343

Peachtree Communities

734

Pulte-Del Webb-Centex

471

Smith Douglas Homes

464

The Ryland Group

456

The Gen X population in the Atlanta market makes up 18.01% of the population, according to 2013 American Community Survey data compiled by RealtyTrac. Single-family closings in Atlanta were up 31% annually in the fourth quarter and 21% quarterly year-over-year. In a market where the median new-home price in 2014 was $271,900, buyers ages 35 to 44 paid a median of $291,600, and those ages 45 to 54 paid $291,900, both higher median prices than millennials or boomers paid. DR Horton capitalized on the higher-end buyers, closing 1,343 new homes in the ATL last year, more than doubling the company's numbers from 2013.

3.       Charlotte-Gastonia-Concord, N.C.-S.C.

2014 Top Five Builders

Closings

True Homes

873

Lennar

865

DR Horton

808

Pulte-Del Webb-Centex

688

NVR

596

Gen Xers make up 18.01% of the population in the Charlotte metro, as well, according to RealtyTrac. The market gained new-home closings with a 4.70% annual increase last year. The overall median new-home price in the area was $263,800 in 2014. Buyers ages 35 to 44 paid a median price 8% to 9% higher than those 25 to 34 and 55 to 64. The age groups including older Gen Xers and younger boomers also sold at a higher median home price, most notably 20.67% higher than did the 55 to 64 age group.

4.       San Jose-Sunnyvale-Santa Clara, Calif.

2014 Top Five Builders

Closings

Taylor Morrison

354

KB Home

295

DR Horton

241

William Lyon Homes

117

Lennar

108

Gen X makes up 17.94% of the population in the San Jose market, where new-home closings in 2014 bumped up slightly, by about 300 closings. While not as dramatic a jump as in other markets, the 35 to 44 age group still paid a median price 3% to 6% more than millennials and boomers. The overall median new-home price in the metro last year was $711,000.

5.       San Francisco-Fremont-Calif.

2014 Top Five Builders

Closings

Shea Homes

305

KB Home

297

Standard Pacific

271

Shapell Homes

181

Pulte-Del Webb-Centex

176

 
 
Finally, at No. 5 is the San Francisco market, where Gen X makes up 17.58% of the population. Annual closings in the market were consistent from 2012 through 2014, with between 3,250 and 3,600 new homes closed each year. The median closing price marketwide was $686,300 for new homes in 2014, but $741,700 for those bought by buyers ages 35 to 44. That closing price was 26.6% higher than for the group ages 55 to 64, who paid only a median of $587,500. New homes closed were evenly spread in 2014 among the top three builders, with the rest of the top 10 companies all closing between 100 and 200 homes.

With constrained lot supply and a push away from affordable new homes in most big metros around the country, catering to a buying group that will pay a higher price might not be a bad idea. Now that the "forgotten generation" is at the prime age for the average new-home buyer, it’s time to reconsider the value of marketing directly to the Gen X children of the '70s.