- Generation X--housing’s stealth addressable universe of 65 million adults ages 38 to 53—may be a critical downturn-resistant opportunity for builders through a bumpy couple of years ahead.
- Sekisui House and Woodside Homes—working backwards—map design, development, and construction planning processes from a crystal clear read on a single personalized GenX consumer lifestyle, what she values, and how she wants to live in her home.
Lots. Labor. Lending. They’re like “Ghidorah,” a three-headed bane of American home builders’ existence. They’re an unholy trinity of chronic--increasingly existential--challenges, especially as intensifying risk of an economic downturn menaces 2020 and beyond.
Think for a moment. What if you could wave a magic wand and peel back the waste, inefficiency, friction, time, talent, and opportunity cost hard-wired in to housing’s vicious-circle ties among those three precious, finite resources? Evidence might show—alarmingly--that $1 out of every $3 of the trillion or more dollars Americans pay for new housing these days gets trapped in one or a combination of these three red-flag areas in housing’s current value chain.
American households—people whose working wages have barely budged while housing costs have skyrocketed—bear the brunt of the impact of that vicious circle of trapped costs.
Alas, the pain they inflict notwithstanding, the three issues are symptoms--not root causes--of what ails residential investment, construction, engineering, and development. When it comes down to it, the “Three L’s” speak to transaction costs. They’re materially important, mind you, but not core to what builders do for people when they succeed as businesses
Which is, namely, to promise customers something they want and need, a place and a community in which to flourish.
Now, customer-centricity is a hot topic these days among builders. Almost every company talks of customer care, and customer satisfaction, and customer experience. Still, how many builders start their business, investment, operations, and supply chain models, shape their business cultures, and set up their development and resource-allocation processes starting with a customer or “consumer story?” How many firms focus on outward-facing outcomes for their home buying or residence-renting customers, and organize themselves, and their processes, and their resources accordingly?
For most builders in this day and age—whose business models begin with land acquisition and flow through a value chain that matches product design, construction processes, marketing, finance, sales, to a margin based on the land deal—this notion would amount to working backwards.
Which is precisely what a home building enterprise preparing for market dynamics that are likely to get pretty bumpy over the next few years needs to do.
Start with consumers, or better yet, a single consumer, and an obsessive focus on an outcome for that consumer. Begin with a promise—of a happy, fulfilled, whole, healthy way to prosper—and create an organization, investment thesis, business platform, process, operational model, construction design and production system, etc., from that outward outcome backwards.
And while you’re at it, why not begin to think about and look, generationally, like a contrarian would at opportunity to withstand some of the economic forces very likely to buffet the market as global uncertainties and dislocation weigh on U.S. economic activity in the next few years?
Look at Generation X, for example. They’re the 65 million Americans currently aged 39 to 53 years, depending on who’s counting, and they’re the generational cohort that tends, statistically, to make the most money, with a median household income of $106,600. According to the National Association of Realtors, they’re the second largest generational cohort currently buying homes, with 24% of total home buyers. They’re in their peak earnings years, and they’re—in terms of family formation, life-stage, and means—full of both options and responsibilities weighing on them.
This is what the team at Sekisui House, Woodside Homes, and BUILDER have been up to as they pursue opportunity in an unmet market need in new home design and development over the next decade or more for their future-of-housing Chōwa BUILDER Concept initiative.
The Generation X opportunity
Let’s explore first, a bit of housing cycle background:
Thanks to both constraints and profit opportunity, home builders focused disproportionate effort and investment on well-heeled Baby Boom buyers with discretionary means for the better part of the housing recovery’s first three-quarters of the cycle, starting in 2010 or so. This period meant builders could cadence throughput, test pricing tolerance levels, and focus on margin growth as they put the abject miseries of the prior decade’s housing crash behind them.
More recently, in the past couple years, galloping prices began to meet resistance in the market and a mix-shift occurred from higher-end momentum to lower-priced demand. Builders pivoted to activate entry-level product and community programs to the degree they’ve been able to. They took dead aim at young adult Millennial buyers who’d begun to show up en masse after a lag due to slow post-Recessionary economic growth, heavy student debt levels, and slower-than-usual family formation.
Housing’s new-construction market recovery, to date, has focused an all-or-nothing obsessiveness with 77 million aging Baby Boomers and 75 million young adult Millennials. Obviously, the commitment, investment, and business focus aimed at the demographic “barbells” of Baby Boom and Millennial buyers is well-placed and aggressive.
We noted here:
“In the last four years, at least 11 publicly traded home builders have announced new entry-level brands aimed at millennials, and another six have introduced new active-adult home brands geared toward baby boomers. Despite this push to lure buyers on the upper and lower ends of the home-buying spectrum, none of the country’s public builders have introduced lines aimed at the generation of home buyers in between these two demographic groups.
Known as the “Lost Generation,” Generation X, made up of Americans born between the mid-1960s and late 1970s, often takes a back seat to both older and younger consumers in targeted advertising and products.
Why would now, on the eve of an uncertain, possibly adverse economic stretch precipitated by protracted global trade wars and worsening international business conditions, be a moment home builders and developers may want to reconsider their relative dismissal of Generation X households?
Here’s a reason, from the National Association of Realtors:
“The median age for this group was 45 years old and they were born between 1965 and 1979. They tended to have the largest families in the past, but were surpassed by Older Millennials this year. Fifty-six percent of these buyers had one or more children under the age of 18 years living at home—23 percent had two children under 18 years at home—and they made up the second largest share of buyers that were married couples at 65 percent. The primary reasons that Gen Xers purchased homes was the desire to own a home of their own, job-related relocation, and the desire for a larger home.
“Gen Xers surpassed Younger Boomers this year and purchased the greatest share of multi-generational homes at 16 percent. They also made up the largest share that purchased detached single-family homes at 88 percent and had the highest median household income at $111,100, boosted by double income couples. They purchased homes in accordance with their incomes and bought the most expensive homes of all generations—a median home price of $277,800. This generation of buyers also purchased the largest homes in size at a median square feet of 2,100.”
Our Research On GenX New-Home Preferences
Research BUILDER recently fielded, with partner The Farnsworth Group, tells us that 40-to-55 year old home buyers—mostly GenX—by a long shot (35%) want a new home that “fits the home of my dreams as closely as possible” as the No. 1 motivator for their purchase. They rank safety, price/value, health and well-being, and privacy as the four most important criteria in their consideration, and tend to equate “healthy home” with “safe/secure” when they’re asked what the term “healthy home” means to them.
Our data, exploring the confluence of broader health technology trends and smart home technology when it comes to Generation X-aged home buyers, reveals that “Home buyers are connecting healthy home with aspects of security on an unaided basis. On an aided basis, themes that resonate are connected to good mental and physical well-being. In addition, these new homeowners believe that healthy home products will become the norm in the future.”
Gen X: Dual Income College Educated
What is more, our research and advisory sibling Metrostudy helped us look at a subgrouping of “Elite,” GenerationX households. This segment makes up a large portion of 20.11% of Summerlin’s buyer pool of households earning $175,000 or more a year, four out of five of whom are married, and 35% of whom have children under the ages of 18, who are college graduates, and nine out of 10 of home are homeowners.
Metrostudy notes additionally that this consumer group tends toward the following five key characteristics:
- Financially savvy and secure; high net-worth, have investments & 401k
- Employed as managerial architect, engineer, or doctor, and often self-employed
- Sustainability is important and part of their lifestyle
- Research, purchase, and conduct business primarily on the internet
- One or both adults work from home; older children of high school and college age
Our buyer story focuses on the journey and experience of a couple, who hails from a cohort of people—65 million of them, whose ages in 2020 will range from 40 to 54 years old—whose generation got its nickname from a first-novel by Douglas Coupland, published in 1991, called “Generation X: Tales for an Accelerated Culture.” This home would be 2nd-time-move-up home, capable of evolving and shifting as a “forever” home, both in real-time and over time as family members and dynamics change.
A MetLife analysis on the cohort notes:
“Positive portrayals of Generation X have tended to revolve around their individualism, independence, proficiency with technology and high levels of education. They are arguably better educated than any generation before them. This study found almost half of Gen Xers grew up in homes where both parents worked and almost two in 10 grew up in single-parents households. Perhaps this ‘latch-key kids’ phenomenon coupled with their experience as the first generation to grow up with computers spawned Gen Xers fierce self-reliance, desire for freedom, techie tendencies and focus on entertainment.”
Getting To The Story
Fact is, broad general demographic cohort characteristics, behaviors, and attitudes served only as a doorway into a deeper dive. For Chōwa, the team sought a fuller, more human, more telling and personalized narrative that would help guide lead architect, Sekisui House’s Hirokazu Miyachi, and his team, as they designed a 5,400 square-foot home of the future in Las Vegas’ Summerlin community.
A reason Sekisui House can focus so intensely on a consumer--her needs, desires, aspirations, expectations, and values--goes back in part to the firm's construction process, a workstream based on factory-based, precision crafting that blends velocity, accuracy, performance, and efficiency with the ability to personalize plans and features to a home buyer's requirements.
The story had to speak to flesh-and-blood needs, and desires, and values, a real family in a real time and place. The notion of attainable aspiration—where intention, hopes, aims, ambitions, and achievement coalesce—emerging, not as a garish, flamboyant, attention-grabbing phenomenon, but rather, in a quieter, more Zen, understated form, whose aesthetic, power, and engineering performance speak for themselves.
Design, elegance, and an elevated experience of simplicity’s role in excitement changed our buyers’ consumer durables purchase behavior, and, also impact their mindsets on what they want versus what they do not need. Heightened sense of value as a consumer comes not from what a purchase expresses to others about oneself, but from a deeper feeling of well-being inside oneself.
In 2020, our buyer is in her late 40s, is married and ranks among Dual Income College Educated (DICE) households, and has children, whose ages range from 13 to 21. Our buyer may feel “overlooked,” as if design, architecture, community planning, engineering, and construction have not kept up with where she is as an influencer, a leader, a catalyst of social and cultural change, and an economic engine. The business case to pay more attention to the needs—and attainable aspirations—of this cohort is a compelling one.
The new home’s livability and functionality must align with two major macro trends that have gained traction among Generation X households, and will no doubt, be important to our home buyer’s story.
First, she and/or her spouse are among the 4 million plus households where one or both members works from home, having chosen and hewed to work-life balances as a high priority from the time they started their careers in the workforce. This is a growing phenomenon, and an opportunity for development, design, and construction, especially as data from Sage indicates that 55% of start-up founders are Gen X.
“By 2020, over half of employees will work remotely, but we still have not figured everything out to make this work. For example, many entirely remote teams still use real-time chat such as Slack for communication — in the process removing all the good parts of being a remote company.” – Amir Salihefendic, the CEO of Doist, a company that builds productivity tools.
Our buyer leads a dynamic and busy professional life, with her home as the base of her business, but travels extensively—30% to 40% of the month, all the while staying active in her community, personal, and family activities at home. She reads, Kindle-style on the elliptical (or Peloton), streams cooking and yoga classes, and binge watches Hulu and Netflix series in down time.
Second, more than one in three Millennials are living with Gen X parents (as is the case with our buyer), and she’s also helping to take care of her own parents, in large part shouldering financial responsibility on both fronts. Here’s some commentary from Pew Research :
“The most common type of multigenerational household – home to 32.3 million Americans in 2016 – consists of two adult generations, such as parents and their adult children. We define adult children as being ages 25 and older, so our multigenerational households do not include most college students who live at home. Households with three or more generations – for example, a grandparent, an adult child and a grandchild of any age – housed 28.4 million people in 2016. “
The Consumer Story
Here’s the working draft of the consumer story that informed design intentions and solutions for the project. This is working backwards. Starting with a consumer household and working to organize architecture, engineering, and construction processes and resource investment to offer that consumer household value.
The narrative goes like this:
Ted and Jennifer are a married couple of nearly 30 years. They are a culturally-mixed couple, he of Western European descent, she from 2nd generation Japanese-American heritage. He is 56, she 52. They each have a good career, and they highly value the family, peace of mind, fun time, mobility, and flexibility that comes with prospering work lives.
They have two children, Ellen, a 19-year-old, 2nd-year Stanford University honors student, likely continuing to graduate school, and Ian, a 14-year-old high school sophomore, fond of the outdoors, life sciences, sports, and the environment.
The family—close-knit, loving, active, and engaged with one another. They practice a blend of family cultural and social traditions at home, enjoy time together and are comfortable pursuing work or life interests in one another’s company, each respecting the other’s need for time, quiet, focus, etc. They are independent thinkers, but see long lines of family cultural connection and care for the environment as essential characteristics of a harmonious lifestyle.
They are recent transferees from Northern California to the Las Vegas area, for professional and lifestyle quality improvement reasons.
He is a retail executive (a la Zappos), with a background in Silicon Valley-style e-commerce strategy. His job is at the Las Vegas headquarters office, with occasional travel to distribution and fulfillment centers.
Jennifer is an independent User Experience design project leader, with an advisory practice among a six or eight commercial clients whose business spans global consumer markets. She travels extensively, and works from home when she’s not on the road.
Ted and Jennifer’s parents—all in their mid-to-late 70s—live in varying regions of the United States: the Southeast, Southern California, and the Upper Midwest. Each loves to spend time with his or her son, daughter, and grandchildren. They are in relatively good health, but not what they used to be, and they like to visit for several week-time periods.
All told, values center on family, educational achievement, and a healthy balance of professional investment and commitment to living a purpose-filled life.
Home is both sanctuary and platform for connections for growth and prosperity. Home centers on the well-being—the harmony and balance between human and nature, work and living, indoors and outdoors, the soul/spirit and the body and the mind.
The family loves the outdoors, hiking, climbing, water sports like kayaking, and camping. They own equipment and gear, which requires storage and care, which makes storage in the garage a high priority item.
Each room in the home functions with balances as the principle intention. Stairways are both naturally functional and sculptural, serving as attractions to the eye, and diffusers of light.
- Kitchen serves as family hub and social “brains” of the home, where connections between family members, extended family, friends, professional associates being entertained, and any human services to the home.
- It’s a cook’s kitchen, but with simplicity, and minimalist elegance as prevailing traits. Storage and “conceal and reveal” engineering give the kitchen a clean design with a place for everything.
- The eat-in-kitchen option seats six, comfortable for the 4 primary family members, plus grandparent(s).
- Family time—both in-person and FaceTime during travels, college, etc—occurs primarily in the kitchen, with key interactions to begin the day, and a family dinner at the end of the day, with additional quality time after dinner.
- Accessory space flanking kitchen allow for additional “messy kitchen” staging area, drop-zone, family-operations area, etc., as well as access to the back yard outdoor dining space.
2. Entry ‘Gallery’ … The entry of the home sets an immediate and striking tone of simplicity, elegance, and discriminating taste. Jennifer and Ted observe Japanese tradition of leaving shoes in the entry foyer, and donning slippers for indoor use.
- The entry speaks of entering a home where simple elegance is the first thought, and carried through the experience of the home, where more is expressed by less clutter, more flow for the eye for natural light and glow of natural textures of the interior.
- This “memory-maker” space creates an immediate feeling of home, welcoming, sanctuary, harmony, and specialness.
3. Great room/Living Room … the purpose, for the family, of this spatial volume is its absolute connection to the outdoors, with openness on both sides, and a flood of natural lighting during daylight hours. At night, the room warms with the rich luster of its earth-tone and timber structure, its spare balance of seating, lighting, and recreation/entertainment features.
- The Great room/living room brings family, extended family, friends, and acquaintances into a home that is welcoming, elegant in its simplicity, and striking in its balance of what is inside and the splendor of outdoors, day or night.
- Use during the weekdays might be for contemplative and solitude time for a family member, or it may be where a family member takes a “work call” when others are not in the home.
- During weekends and on holiday times, the Living Room/Great Room is an entertainment center, with indoor-outdoor flow and plenty of areas for small groups to cluster.
4. First-floor suite …. This space serves primarily as living quarters for Ted or Jennifer’s parents during the years one or more of them may require daily care and tending.
- The suite lends full privacy for sleeping, bathing, and daily activities, including reading, hobbies, entertainment, etc.
- The suite has direct access to outdoors, and to a one-car garage
- The suite can serve as a “revenue unit,” with limited (microwave, and hot-plate) food preparation and storage in the flex-space.
- Bath and access are designed for ADA-compliant, age-in-place universal design accessibility.
5. Dining Room … The dining room serves as a formal family and friends dining area, ranging from six to 10 people at the table. It is in use on special occasions, extended family get-togethers, and holiday observances.
6. 2-car Garage … Each member of the family pursues a range of outdoor activities, including kayaking, hiking, camping, etc. The garage serves as space for a high-end hybrid-fueled vehicle, as well as recreational gear, with superb organizational solutions for optimal efficiency.
- There may be an “activity zone” in the garage for projects, including woodworking or other hobbies, as well as “staging” for camping trips, etc.
- Upstairs master … The master area overlooks the front of the home and connects with a balcony with extraordinary views and exposure to light and nature. This is a sanctuary center, as free of complexity, clutter, and distraction as design can accommodate, all about peace of mind and connection to basics—one another and the world.
- The master “connects Ted & Jennifer with one another—even when one of them is traveling abroad through Skype or FaceTime—and with nature. The space is all about sanctuary, balance, and healthful living. A full walk-in closet includes ample space and lighting for a Peloton exercise area, Yoga, and meditation.
- The bath area – set up for his and hers areas – includes both home spa and toilet essentials.
2. Upstairs sitting room area …. A secondary family relaxing space, primarily used by high-school aged Ian as a place where he can spend time with friends or on his own, doing homework, relaxing, etc
- This area serves primarily as Ian’s recreation and entertainment area. It is also used as a space for Ted’s and/or Jennifer’s one-on-one time with their son, which they are committed to.
3. Second bedroom … This is Ian’s room. The room’s volume and design run consistent with the rest of the house, emphasizing simplicity, clean lines, high function, conceal-and-reveal features, and a kind of visually quiet theme.
- Ian’s interests in biological and environmental sciences makes his connection with outdoor space from his room important.
- The space affords both privacy a male teen-aged member of the family will need and the transparency and access caring parents want.
- They are connected but separate in a healthy balance of both.
4. Second-floor suite … This space serves multiple purposes. When the older daughter Ellen is home from college/visiting she stays in this space. On other occasions, the range of use can be a guest bedroom, or if necessary, space for a “care-giver” if a grandparent needs full-time care.
- The “flex-space” area of the upstairs suite also serves a large percentage of the time as Jennifer’s fully-outfitted “home office.” It is equipped with a large interactive screen for videoconferences, whiteboarding, and graphic display, as well as other communications platform technology.
- This flex space is sound-proofed but it is also pleasant to spend time in as an additional relaxing, meditative, and contemplative space when necessary, with natural light, and an enveloping openness to air and shadow.
We introduced the BUILDER Chōwa Concept Home project here in March. The initiative, which is real-world proof that home builders are committed to investing in innovation, research and development, brings together an international design, development, and construction team from Japan-based Sekisui House and its wholly-owned home building company Woodside Homes. This concept home will introduce technologies, best practices, and a new approach to “improving society through housing,” to North America-based home building enterprises.
When the home is complete, home building in the United States will have a living real-world laboratory example of some of the world’s most advanced building, engineering, design, and development systems—never before assembled or witnessed in this part of the world.
However, none of these advances would matter if there isn’t a clear value to a consumer—the person or people living in the home—for whom these innovations meet a need. This is why the team at Sekisui House and Woodside Homes started with that obsessive focus on a consumer.
And worked backwards from there to design and build Chōwa.