Baby Boomers, Gen Y, and the Recession Shift Long-Held Housing Tastes and Trends

The economy and jobs are reshaping the household picture, a ULI panel says, as Gen Yers delay buying and boomers age in place. Among all groups, walkability and transit dominate the wish list.
By:Katy Tomasulo

As the housing industry continues to claw its way out of the downturn, the recession and unemployment picture are dramatically influencing the way consumers view homeownership, according to the “Housing in America” panel during ULI’s fall conference in Washington, D.C. As the country’s two largest demographic groups—baby boomers and Generation Y—reassess priorities, household formation is down; tastes and demands are shifting toward walkable, transit-oriented communities; and the overall buyer profile within age groups is simply not as cut-and-dried as it once was.

Even as housing recovers, we’re not going to return to the same trends and tastes, says John McIlwain, senior resident fellow at ULI. “What people will want … will be substantially different.”

Among all age groups, the economy continues to be the chief driver. The jobs outlook is not only impacting sales and inventory, but also household formation, which has dropped to 25% of the norm, McIlwain reports, stemming from a decrease in immigration and the recession forcing young adults to live with their parents (or even vice versa). This trend, he says, won’t reverse until unemployment begins to drop.
Though the recession hit everyone hard, its impact on Gen Y will likely have the most long-lasting influence on housing trends. With 83 to 85 million people born from 1981 to 1999, it’s the largest demographic group the country has ever had, and therefore has massive buying potential. Problem is, they’re also the most economically constrained, McIlwain says, with a 30% unemployment rate and an average $23,000 post-college debt. They’re not saving for a down payment, and their parents, struggling to recover their own retirement savings, can’t help.

As a result, this age group’s view of the American Dream of homeownership is vastly different. “People in the youngest generation have seen the struggles family and friends are going through, and the assumption of the house as a wealth generator is very different,” says Marty Jones, president of Corcoran Jennison Cos.

Richard Koss, director of economics at Fannie Mae, found similar changes in consumer surveys conducted during the past year. In January, 70% of consumers surveyed viewed homeownership as a safe investment; by July, that percentage had dropped to 67%; in 2003, confidence was as high as 83%.

The combination of these factors, McIlwain says, will likely lead to unprecedented rental rates during the next 10 years.

GEN Y OPTIONS
To meet the challenge, developers and builders must find a way to provide products that Gen Yers can afford in locations they desire. Among their wants and needs:

Urban settings or, if suburban, walkable town centers and mixed-use communities. They desire smart growth and density, and are willing to accept a less ideal home if they can walk to work and retail.

A focus on work-life balance and connectivity.

WINKs: Woman with income, no kids. This group, typically 26 to 29 years old, is highly educated. They’re renters, but are likely to buy before marriage. Like others, they desire walkable neighborhoods near transit.

More young adults are delaying marriage; 85% of household growth will be households without kids, says Charles Hewlett, managing director of real estate advisor Robert Charles Lesser & Co.

BABY BOOMER TRENDS
Baby Boomers begin turning 65 next year. Here is how this group will continue to impact housing trends:

They’re retiring earlier than previous generations; however, many still work, either part-time, in a lower-level position, or as a consultant.

Many will age in place; however, in 10 years, we will see increased demand for seniors housing as the first wave reaches the mid and late 70s.

The earlier prediction that baby boomers will move to downtown urban areas has not happened, Hewlett says. But they are looking for what he calls “safe urbanism”—walkable, denser areas with transit.

They want locations with an affordable cost of living and quality healthcare. Both of these factors trump climate, Hewlett notes.

They look for communities with opportunities for continuing education, culture, and an active lifestyle.

They still count Florida and Arizona among the top five retirement locations, but the Carolinas, with slightly cooler temperatures and lower threat of hurricanes, are becoming their new Florida, Hewlett says.

ADDITIONAL INFLUENCERS
Among the challenges and trends across markets:

Golf course communities are out; conservation communities with passive open space and trails are in.

Walkable, transit-oriented communities or those with town squares are “going to be a key part of creating projects that attract interest,” says Jones.

Immigration will continue to be a huge housing influencer; however, where previous generations settled in urban areas, many new immigrants are heading straight for suburbs, says Hewlett.

In the rental market, green is still being driven more by investors than consumers, Jones reports.

The U.S. will grow by another 100 million people by 2040, and 60% of that will come from just 20 metro areas, primarily in the coastal areas and the south.

Finally, there’s the question of what will happen to the McMansion. In new construction, too-large houses have fallen out of favor—but what about existing homes? The vast gap in numbers from baby boom to Generation X, along with continued economic woes and shifting tastes, left one panelist to wonder who will buy baby boomers’ larger houses and what further impact those properties will have on buying trends over the next few years. Stay tuned.

Katy Tomasulo is Deputy Editor for EcoHome.

Favorite Home Shows of 2010

Those of you needing a shot of home decorating inspiration this year needed to look no further than your TV remotes. From home renovations to painting advice and cheap fixes, there were plenty of shows to inspire. The Nate Berkus Show debuted in September, and the preview of Secrets of a Stylist has everyone excited for its premiere in 2011! HGTV is the go-to channel for the majority of home decor shows, but there are several other shows that are not to be missed, including Planet Green's The Fabulous Beekman Boys.

Focus on Fire Safety: Holiday Fire Safety

Decorating homes and businesses is a long-standing tradition around the holiday season. Unfortunately, these same decorations may increase your chances of fire. Based on data from the National Fire Protection Association (NFPA) and the U.S. Fire Administration (USFA), an estimated 250 home fires involving Christmas trees and another 170 home fires involving holiday lights and other decorative lighting occur each year. Together, these fires resulted in 21 deaths and 43 injuries.

Following a few simple fire safety tips can keep electric lights, candles, and the ever popular Christmas tree from creating a tragedy. Learn how to prevent a fire and what to do in case a fire starts in your home. Make sure all exits are accessible and not blocked by decorations or trees. Help ensure that you have a fire safe holiday season.

Christmas Trees
What’s a traditional Christmas morning scene without a beautifully decorated tree? If your household includes a natural tree in its festivities, take to heart the sales person’s suggestion – “Keep the tree watered.”

Christmas trees account for hundreds of fires annually. Typically, shorts in electrical lights or open flames from candles, lighters or matches start tree fires. Well-watered trees are not a problem. A dry and neglected tree can be.

Caring for Your Tree
Do not place your tree close to a heat source, including a fireplace or heat vent. The heat will dry out the tree, causing it to be more easily ignited by heat, flame or sparks. Be careful not to drop or flick cigarette ashes near a tree. Do not put your live tree up too early or leave it up for longer than two weeks. Keep the tree stand filled with water at all times.

Disposing of Your Tree
Never put tree branches or needles in a fireplace or wood-burning stove. When the tree becomes dry, discard it promptly. The best way to dispose of your tree is by taking it to a recycling center or having it hauled away by a community pick-up service.

Holiday Lights
Maintain Your Holiday Lights
Inspect holiday lights each year for frayed wires, bare spots, gaps in the insulation, broken or cracked sockets, and excessive kinking or wear before putting them up. Use only lighting listed by an approved testing laboratory.

Do Not Overload Electrical Outlets
Do not link more than three light strands, unless the directions indicate it is safe. Connect strings of lights to an extension cord before plugging the cord into the outlet. Make sure to periodically check the wires – they should not be warm to the touch.

Do not leave holiday lights on unattended!

Holiday Decorations
Use Only Nonflammable Decorations
All decorations should be nonflammable or flame-retardant and placed away from heat vents. If you are using a metallic or artificial tree, make sure it is flame retardant.

Don't Block Exits
Ensure that trees and other holiday decorations do not block an exit way. In the event of a fire, time is of the essence. A blocked entry/exit way puts you and your family at risk.

Never Put Wrapping Paper in the Fireplace
Wrapping paper in the fireplace can result in a very large fire, throwing off dangerous sparks and embers that may result in a chimney fire.

Candle Care
Avoid Using Lit Candles
If you do use lit candles, make sure they are in stable holders and place them where they cannot be easily knocked down. Never leave the house with candles burning.

Never Put Lit Candles on a Tree
Do not go near a Christmas tree with an open flame – candles, lighters or matches.

As in every season, have working smoke alarms installed on every level of your home, test them monthly and keep them clean and equipped with fresh batteries at all times. Know when and how to call for help. And remember to practice your home escape plan!

After the holidays, don’t throw your natural tree away! Here are some tips on what to do with your tree after the holidays. In general, you have these options:

Curbside pick-up for recycling - Most areas will collect trees during their regular pickup schedules on the 2 weeks following Christmas. There are often requirements for size, removing ornaments, flocking, etc; see below for details.
Call for an appointment to have a non-profit in your area pickup your tree. Some boy scout troops are offering a pickup service for a small donation (often $5).
Take your tree to a drop off recycling center. Most counties have free drop-off locations throughout the county. Usually, you may take up to two trees to any of the following drop-off locations at no charge.
Cut the tree to fit loosely into your yard waste container.