Editor's Note: This article is republished with permission from Inman News. View original article here: "Your real estate customers are not who you think."
Your customers are not who you think they are. That was the gist of several sessions at last week's annual Pacific Coast Builders Conference (PCBC) at San Francisco's Moscone Center. The conference is sponsored by the California Building Industry Association.
"There is no 'today's consumer.' They are incredibly diverse," said Brent Herrington, a panelist and president of Kukui'ula Development Co.
The U.S. population, nearly 309 million in the 2010 Census, will likely grow to 400 million in the next 30 years, said James Chung, founder of New York-based strategy and research firm Reach Advisors.
"America is the only fully industrialized nation in the world that's growing. Don't underestimate the impact of that on real estate demand," he said.
The composition of that growth will be different from what it has been in previous decades, however.
In the next 30 years, the non-Hispanic white population will grow only slightly, and "not because of births, but because of people living longer," Chung said.
The vast majority of that 100 million-person jump will be among minorities.
The United States is on its way to becoming a nation where minorities account for the majority of the population, Chung said. In 20 states, most of them in the South and West, minorities make up nearly half or more than half of all people under 18.
"There are now as many mixed-race couples as there are white couples," Chung said.
Between 2000-10, minorities accounted for most of the growth among people in their peak earning years (25-54), which roughly corresponds with peak homebuying years, Chung said. During that time, the number of non-Hispanic whites in that age group fell 7 percent, while the population of Hispanics rose 26 percent, the population of blacks rose 10 percent, and the population of Asians increased 24 percent.
Most homes are built with one type of household in mind, Chung said: a married couple with children. But such households now account for only 1 in 5 American households.
In the past decade there has been a dramatic increase in both younger and older singles, single parents with children, and in cohabiting couples, he said.
This means that builders and other real estate professionals need to think about how to serve those demographics by asking themselves questions such as: How do you make the purchase process better for a couple who isn't married? How do bathroom configurations change with family composition? How do you make better products and communities for singles?
The average square footage of new homes started moving up in 1985 and started scaling back when the last of the baby boomers started to move out of their peak homebuying years, Chung said.
Because the age cohort that came after them, Generation X, is considerably smaller, "there's a much larger supply of trade-up homes than there is demand," Chung added.
Multigenerational households have increased during the downturn, with financially strapped "boomerang" adult children moving back home and elderly parents sometimes moving in with children when retirement facilities become unaffordable, said Rita Lamkin, president of consumer research and marketing firm Preface Inc.
Nevertheless, there hasn't really been a corresponding jump in demand for move-up homes, she noted.
"When the recession hit, the average American family became a multigenerational household. They're trying to figure out how to live in peace, but the houses don't work for them," Lamkin said.
Typically, such families want to be able to have more privacy, with children having their own bathroom, for example.
"These builders that don't want to spend money on new designs are building the same homes as those in foreclosure. It makes no sense," she said.
Millennials, also known as Generation Y, are entering their peak homebuying years. But they are not likely to take up the bulk of those trade-up homes anytime soon either. Singles in their 20s have jumped 37 percent in the last decade. The average age of marriage used to be 29; it's 31 now, Chung said. In most major metro areas, of adults 25-34 -- the prime age range of first-time homebuyers -- only 30 to 40 percent have ever married.
"The millennials (are) postponing decisions. There are more 28-year-olds in the world today than any other age. They're renting apartments," Lamkin said.
However, she cautioned against relying on generalizations by age cohort.
"There's an overemphasis and overreliance on these huge generations: the baby boomers, Gen X, Gen Y. To continue to define markets in those terms has become quite irrelevant and we really need to start focusing on the micromarkets within those categories," Lamkin said.
"Every location is different; it's very specific. There are some micro trends that are happening that are worth watching closely."
In a local area there can be several types of households and overarching trends at play, said Belinda Sward, executive managing director of Strategic Solutions Alliance, a planning and development consulting firm.
These trends can be patterns of marriage and divorce; immigration inflows and outflows; women outliving men; or lifestyle changes such as more unmarried couples having children, Sward said.
These patterns can change by age cohort as well. For instance, among millennials a cohabiting couple will sometimes live with one or two roommates. In that sort of communal living, a group of people often pool their resources to "go for a high-end, luxury unit," Lamkin said.
There's also a trend Lamkin called "Hippie 3.0" surfacing in places such as the Coachella Valley in California's Inland Empire.
"Clothing and attitudes ... there's a whole new group of hippies coming out of the millennials," she said.
Among millenials as a whole, "60 percent of them are saying they want to buy something in five years," she said.
Then there are the WINKs (women with income and no kids), young and old.
In major metro areas, single childless women in their 20s earn 111 percent of what their male counterparts earn, a trend Chung called the "Gen Y gender gap." That phenomenon is the result of another trend: Women receive bachelor's and advanced degrees at 1.5 times the rate men do -- the exact opposite of a similar gender gap in 1972, when men earned 1.5 times more degrees.
The economy has also become more information-based and lost many jobs during the downturn in industries traditionally dominated by men, such as construction and manufacturing.
"The economy has treated men and women differently, and that has impacted the real estate market and household formation," Chung said.
Among boomers, Lamkin points out that 30 percent of boomer women never had children.
"There are a whole bunch of people who never had kids, and as they start to age you have people who have no children, have no family," she said.
"Now (we're) starting to see a shared housing opportunity where long-term friends (live together and) take care of each other. You have this 'chosen family' phenomenon."
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Learn more about markets featured in this article: Los Angeles, CA.