The demographic of the average American homeowner is slowly changing. It can be difficult for builders to stay ahead of constantly changing purchasing trends. Who is making the bulk of the home purchases now and are they finding what they want? Here are the top demographics and what you need to know to stay ahead of the changing demographic curve.
A report published by the National Association of REALTORS revealed that millennials accounted for the largest portion of home sales in 2018 at 36 percent of all purchases. Baby boomers followed closely by accounting for 32 percent of home sales. Generation X bought 26 percent, and the smallest demographic of home buyers were 72 and older at 6 percent.
So, how does this change affect the current inventory of homes and the future of residential construction? To better understand, you can examine the changes from a generational standpoint.
Millennials
Millennials, the generation that people love to hate, range in age from their early 20s to late 30s. On average, millennials have been slow to purchase their first homes. The reason is twofold: an increased amount of student loan debt as well as waiting longer to start a family than previous generations. Realtor.com estimates that millennials will make up 45 percent of mortgages this year, with 2020 being their peak purchasing year. The millennial generation also brings the first real surge in single female home buyers.
What Builders Should Consider
With millennials predicted to be the largest influencers on home-buying trends in the coming year, it’s important to consider what they are likely to purchase. This generation wants affordable, entry-level houses. Townhomes and condos are a popular choice, but even multifamily inventory is low due to the high demand and recovery time from the housing crash. Millennials like to entertain, so builders should include amenities such as pools and outdoor grills. They also enjoy interacting with their community which makes shared areas such as gyms and parks a smart addition.
Baby Boomers
Baby boomers, whose ages range from the 50s to the 70s, have the second-most impact on home purchases and remodels. Their households are often multigenerational. Frequently, younger baby boomers still have children living under their roof, while those at the older end of the boomer age spectrum may be caring for elderly parents in their home. Another common trend with this group is deciding to “age in place,” meaning when they find a home that suits them, they plan to live out their days there. When boomers decide to age in place their homes often require substantial remodeling to make these accommodations.
What Builders Should Consider
The boomer generation is either retired or nearing retirement age. Many continue to work past the age of 65 and require more schedule flexibility; therefore, home office space is desirable. Builders can accommodate this by including plenty of outlets and opportunities for built-in cabinetry. Since yard work can become tedious and less enjoyable as you age, homes with low-maintenance landscaping are a good idea. Builders should consider replacing traditional lawns with decorative landscaping and functional patios. Another draw for this generation is single-story homes or those with the master suite on the first level to avoid the hassle of climbing stairs. Boomers are at an age where they are looking for luxury when they purchase a home. Builders should replace cheaper finishes with high-end offerings to attract this generation. Cookie-cutter neighborhoods where each house looks the same as the next are less appealing to this age group. Builders should consider a more traditional approach to neighborhood design to cater to this highly influential group of home buyers.
Gen X
Generation X members range from their late 30s to early 50s. Generally, this group is in their prime salary-earning years, which means they have more cash to burn than other generations. Because the average Gen Xer has an established family, their home-buying choices are most often influenced by proximity to their place of employment and the quality of the zoned school district.
What Builders Should Consider
This generation is not looking for townhomes or condos. Single-family homes with privacy and space for children are their target purchase. Gen Xers lean toward properties with ranch or contemporary architectural design styles. They also typically purchase houses with larger floor plans to accommodate their immediate family, knowing there’s a chance they may soon need to care for elders in their home as well. Generation X is more aware of the impact they have on the environment than those who came before them. Offering energy-efficient upgrades is a great way to appeal to this group. Builders should also offer a great deal of choice flexibility when looking to satisfy potentially picky Gen Xers.
Silent Generation
The silent generation, also referred to as traditional, are over 72 years of age. Often this group is downsizing from the home where they raised their family and prefers to purchase new for the ease of maintenance and upkeep. They are unlikely to purchase a detached single-family home and lean toward retirement communities or neighborhoods.
What Builders Should Consider
This generation is looking for all things comfort. They are less interested in driving and are looking for communities that are conveniently located near amenities such as shopping, leisure, medical centers and easy public transportation. The traditional generation comes from a time when it was more common to save for a rainy day than to spend money on flashy things. But small home conveniences have become a big draw for them. Under-cabinet task lighting, larger doorways, low step-in showers and adjustable-height showerheads are all everyday luxuries that this group is likely to opt for but may not realize are available to them. Builders should present these features as well as offer some of the less common features that cater to those with accessibility limits, such as multilevel countertops, lower vanity heights and counter-height microwaves.
Takeaways
Each generation of home buyer has their own self-identity that influences their purchasing decisions. Certain aspects of a home appeal to an individual’s current life stage as well as what they perceive as the “next step.” Understanding these buyer trends related to generation can help builders and developers forecast inventory needs.
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