Generation X—young families and adults ages 31 to 45—are likely to lead the home-buying recovery as it gets underway, according to real estate experts who spoke at an educational webinar produced by the National Association of Home Builders (NAHB) in partnership with Builder magazine.
These potential home buyers are most likely to think it’s a good time to get off the fence—and have strong opinions about the design features their new homes will include.
At 32% of the population of home-buying age—generally defined as those who are at least 30 years old, the Gen X population cohort isn’t the largest, but it’s the most mobile, said presenter Mollie Carmichael, principal of John Burns Real Estate Consulting in Irvine, Calif. “They are in full force with their careers and they need to accommodate growing families,” she said.
In sharp contrast, even though they constitute 41% of prospective home buyers, Baby Boomers continue to wait for the market to improve, and their decisions to delay retirement also delay their decisions to downsize into a smaller home, Carmichael said.
Most of the 10,000 buyers and potential buyers in 27 metro areas that the consulting company surveyed were optimistic about a new home purchase, with between 85% and 89% saying that it was a good time to buy a home. Only 13% said they thought home prices would continue to fall, further evidence that it’s “not all about price,” she said. “They want something compelling, from a design or personalization standpoint,” said Carmichael.
In addition, though the average home size is shrinking, a majority of prospective buyers said they would like a bigger home than the one they have. “These are first-time buyers or younger families looking for more room to grow,” she said.
Seventy percent said that they were willing to pay $5,000 more for a green home, but those responding to the survey said that they expected new homes to already have many green technology features. They also said they would pay a premium for dark wood cabinets, a separate tub and shower and a fireplace in the living room, and more preferred a great room over formal spaces.
And while community amenities are important to Gen X buyers, 46% said they prefer a home in a large-lot, suburban development, versus the 21% looking for a traditional or “walkable” neighborhood.
Webinar panelist Heather McCune, director of marketing at Bassenian/Lagoni Architects in Newport Beach, Calif., also emphasized that design will be important in generating sales in the emerging marketplace. “The notion of ‘build it and they will come’ no longer works. Design matters,” she said.
McCune said buyers are looking for homes with a connection between indoor and outdoor spaces, even in colder climates, to create the perception of greater home size, even if the space is only usable for part of the year. They also want more storage, an open floor plan and flexibility in the garage.
“While Gen X numbers are smaller than the birth cohorts before and after them, their numbers have been enlarged by steady immigration,” said NAHB Chief Economist David Crowe. “Gen X may wait longer than their predecessors to establish their own household or buy a home because of the recent recession impacts, but the trends are still likely to occur as they have for past generations.”
Boomers are making a mistake not selling now. GenXers are the first children to have grown up with the Internet. They get their news from many different sources before forming an opinion. GenXers have far more information than any group before them ever had.
And btw Boomers… GenXers are the ones that are going to chose the rest home you get put into. Better sell now and enjoy your money before someone else does for you.
I’d bet the 21% looking for walkable neighborhoods generally are more educated and have more money to spend. Though most developers will probably be chasing the 46% who like the suburbs and build more beige wonderlands.
“Boomers are making a mistake not selling now.”
Many might want to sell, but they can’t. They’re underwater.
Many have or will be laid off. Many of them still have mortgages to pay. They’re headed to some kind of foreclosure.
Next big story, many previously secure boomers walk away from their homes. That’s a lot of homes. Look for newly rising lakes of underwater homes in areas that were previously dry. To find them, look for neighborhoods with lots of currently employed boomers.
Keep in mind, boomers are edgy, artistic, social activist, green; but that was always just a small portion of the demographic. Boomers are mostly big consumers and led the way with me, me narcissism.
Boomers are not their parents. They’ve had several different jobs, and they’ve moved. Their parents stayed in the same house and their dad in the same job forever. The boomers didn’t. So you have a lot of boomers with hefty, fairly new mortgages/refinances.
Boomers have more stuff than the say, 21-35 year old group, but in many ways they are equally unsettled.
I must run with a conservative crowd of boomers,
Most I know in SoCal have paid off there mortgage or are close to it and are not planning to move anywhere as they bought their first home in the early 80’s to mid 90’s (thanks Prop 13).
There are a few who have already received a sizable inheritance as well and have recently been buying retirement homes as second homes for now.
The main issue I see is they still have their Gen-Y (and a few Gen-X’ers) well into their 30’s along with gram ma and pa living in their homes.
So I think there are a few boomers who are in the desperate camp, but from my experiences the long term SoCal boomers seem to be sitting better than most seem to think.
Also from my experience there were quite a few Gen-x’ers buying at the top and later foreclosed.
Gen X buyers need to lock in a low rate while they are available. Many are predicting rates to rise.
I’m a Gen Xer and I find pronouncements based on demographic cohort to be comically wrong. Some Gen Xers want more storage, some don’t. Some care about design, some don’t. For everyone who wants a cavernous master suite is someone who prefers cozy, small bedrooms.
It doesn’t come as a surprise that home buyers with expanding families want large properties with large lots. The problem is whether or not they can afford them. 2500+ SqFt homes at $250-300/sqft aren’t exactly starter homes for most people whether they are gen x or gen y. Most home builder price points are for people looking to move up buy in my opinion (at least in San Diego, Inland Empire has some big cheap properties).
If I’m a home builder that wants to sell expensive properties I should be focusing on what wealthy boomers want, maybe disability access, single story, etc. If I’m a builder that wants to focus on gen x and gen y I need to figure out a way to keep my price point down. Maybe smaller homes with desirable floor plans, sacrifices on yard space, etc.
Building a bunch of big $500K plus homes and marketing them to gen x as a starter homes doesn’t seem to be the best strategy in today’s market. That was a strategy that worked during the bubble and this article seems to be hinting at convincing builders it will happen again. It feels like a “Telling them what they want to hear,” piece.
“In addition, though the average home size is shrinking, a majority of prospective buyers said they would like a bigger home than the one they have. “These are first-time buyers or younger families looking for more room to grow,” she said.”
Yes, I myself am looking to grow several feet taller, and I need extra space in order to do it.
A word to number 3 “consultant”. Actually there won’t be a rising lake of underwater homes, there will however be a lot of home prices floating ever higher on a sea of US Dollars that have already been printed and sent out into the US and world economy. The technical term for this is inflation, so, while house prices may not rise this year or even next they are practically certain to rise as more dollars chase a finite pool of hard assets.
About the only thing that could change the above scenario would be if Nelson Mandela had sold his good freind Gaddafi a 1950’s style atom bomb or two and he had planted them in interesting places like for example New york or Washington Gaddafi Is mad you know)
adrewa, that is only true if we see wage inflation. Otherwise, inflation could actually have the opposite effect via high interest rates and lower disposable income.
Missing the psychobabble tag. 🙂
Duncbdunc … Its all location man … Folks buying near or above a million on the coast are not dependent on wages … especially considering the percent of all cash/ large downpayment deals.
A lot of us are holding on to savings to put our own big down payment
Also quite likly we will see high buying power at high end if the wages at lower end keeps on dropping … That’s how it has been all along in big corps.
I’m a gen X (43) and I completely agree with comment #7.
My 6 oldest friends (met them in 2nd grade and still meet them often) married 15 years ago and bought brand new 3000 sq/ft track houses in Minnesota at that time. So none of them is underwater or even distressed and none of them are buyers or sellers. They are happy healthy homeowners.
One of my friends from high school lost his job and then his house to foreclosure and now lives at his mom’s place with little hope (stuck in a part time job and unable to find full-time) of moving out of there. I know gen x-ers in just about every state in between those two extremes.
As a Gen X’er, why would I want to jump to catch the knife the Boomers dropped? We have seen the biggest Real Estate bubble in a generation and have seen it only partially deflate. Tightening lending standards and rising interest rates only mean one thing…LOWER PRICES. I’ll be happy to rent at 1/2 the cost of owning.
And to #6 Dick, that is the same shitty mentality that got us in this mess. Why are you trying to convince people to jump in front of a bus for your own selfish reasons.
All of my GenX kids are either still with me in my mortgage free home or in their own rentals collecting a check from me every month. Half of their friends tried to ride the Buy-A-Home lottery express and ended up getting crushed.
“Gen X buyers need to lock in a low rate while they are available. Many are predicting rates to rise.”
Unfortunately for the Boomers, Gen X buyers have this little thing called the internet, and as such are much more informed they they.
Phase Shift: The Next Leg Down in House Prices http://www.oftwominds.com/blogmar11/phase-shift-housing3-11.html
1. As I reported on Daily Finance, new mortgage broker compensation rules are about to wipe out independent, small mortgage originators and brokers. Mortgages will probably become harder to come by and more expensive as the “too big to fail” banks will consolidate their grasp on the mortgage market.
2. Interest rates will rise. Most financial analysts are supremely confident that the Fed can keep interest rates near-zero forever. I suspect their confidence is misplaced. As I discussed yesterday, the Fed has backed itself into a corner, where if it pursues QE3 then it will fire up inflation that will destroy profit margins and household purchasing power. If it ceases to buy U.S. Treasury debt, then interest rates will shoot up.
As interest rates rise, the amount of money home buyers can borrow drops. House prices follow this dynamic.
3. Income for the bottom 90% is stagnant. All the bogus “housing is now affordable again” charts floating around all base their rosy conclusions on median income, neatly avoiding the reality that the top 10% has garnered the majority of income gains. Factor out the top 10% and you find real incomes have actually declined for the lower 90%.
4. There are too many houses and not many buyers. The demographics are this: Baby Boomers are trying to sell to cash out or move, and the impoverished generations behind them cannot afford bubble-era prices. Just because prices have retreated to 2002 levels doesn’t mean they’re cheap–2002 was already a bubble, as you can see in the chart.
5. The Federal-supported “recovery” is in trouble, politically and financially. As long as the nation obeys the whip of the Fed and allows it to print $1 trillion to buy Treasury debt every year, then the travesty of a mockery of a sham can continue. But as I noted yesterday, this policy is destroying the dollar and the purchasing power of households.
6. Every investor who bought with cash because “this is the bottom” will 1) be underwater and anxious to sell and 2) be out of cash, having bet their capital playing “catch the falling knife” with real estate valuations. Sorry, cash buyers: the knife is still falling.
Indie Home Owner, you are at wrong place. Your article is not relevant to North County Coastal Market. Coastal North County very much falls in the following category of top 10% … taken from your article …
“So yes, real estate favored by this top 10%–Manhattan, Westwood, San Francisco, etc.– will hold its own as those benefiting from fat Federal contracts, Wall Street’s renewed license to practice piracy, the bubble in lighter-than-air Web 2.0 stocks, etc. try to outbid each other”
Rich will continue to get richer on the coast … till the time YOU WANT to have your dream home on or near coast. The day everybody wants to live in North Dakota, coastal market will definitly enter Phase 2,3,….8,9 all the way back to year 1857 price point.