If you think the baby boomer group was immense and steered the housing market plus every element of the retail industry, get ready for throng that contains many of their consumer-crazy children – the proud members of Generation Y.
These youngsters, born in 1979 or later, will have 74 million members (an estimated 3 million more than the boomers) and make up 34 percent of the population by 2015. Their homes will be preferred for their utility, not prestige, and they will be willing to trade size and curb appeal for lifestyle and convenience factors.
According to Alex Bond, 26, who performed a Gen Y preference study for the Urban Land Institute, consumers his age will see the benefits of a forced savings plan and buy as soon as they can – even if it means owning for a short period of time – and seek city shopping and nightlife. They will have no problem carrying debt, especially for tech toys and other “must have” items, because they feel their rising salaries will eventually mend any financial woes.
“You will see Gen Y people be more wary of paper investments,” Bond said. “Many of them saw what happened to their parents’ tech stocks and would rather put their money toward housing, especially if they can walk to the things that interest them.”
Gopal Ahluwalia, senior vice president of research for the National Association of Home Builders, noted that while Gen Y buyers own only 7 percent of all the households in the United States, 26 percent of them plan to buy a home in the next two years, compared with 13 percent of baby boomers and 6 percent of seniors. Among renters, 46 percent of the Gen-Xers and 47 percent of Gen-Yers plan to buy a home within the next two years, compared with 26 percent of baby boomers and only 4 percent of seniors. The younger guys also will be a force in new-home plans for builders and developers.
“Households headed by Gen-Xers accounted for 28 percent of the total households in 2003,” Ahluwalia said. “But they purchased 49 percent of all newly built homes sold that year. Add the Gen-Yers, and you suddenly have 55 percent of the new-home market.”
Other facts from the NAHB study:
- Gen Y members want 56 percent more space in their next home than in their current home. Gen-Xers want approximately 49 percent more space in their next home, while baby boomers want 22 percent more and seniors 17 percent more.
- More than 90 percent of Gen Y members want to buy a single-family detached home versus a townhome or other variety.
- Gen-Yers are willing to pay 34 percent more, and Gen-Xers 11 percent more, for their next home. Baby boomers are expected to pay 2 percent more for their next home.
- Gen Y and Gen X prefer two-story homes (56 percent and 54 percent, respectively), while baby boomers and seniors prefer single-story homes (56 percent and 74 percent, respectively).
- Three-fourths of Gen-Yers and Gen-Xers prefer 9-foot or higher ceilings on the first floor. This compares to 65 percent of baby boomers and 54 percent of seniors.
“We find that preferences of younger buyers tend toward greater space and more sophisticated amenities than those of their forbears,” Ahluwalia said. Incorporating these preferences in homes that new buyers can afford will be our industry’s challenge going forward. Just tracking these evolving trends will be an ongoing challenge for NAHB.”
Pulte Homes, one of the nation’s largest home builders, attempts to ascertain preferences of 11 separate housing segments by isolating individual Target Consumer Groups. Historically, the industry used three approaches – purchase cycle (first-time buyer, move-up, move-down), product type (single-family detached, single-family attached), and price range. Pulte now tries to produce a matrix by crossing 11 lifestyle groups with income. The company then arrives with a capsule of how many of each group of people, with what financial resources, exist in each market.
“The simple idea is to leverage the capabilities of segmentation to identify consumer wants and needs by stage of life. That’s the constant,” said Steve Burch, vice president of segmentation for Pulte Homes. “As new consumers ‘flow through’ the life stages, we can examine their changing tastes and interests against a backdrop of their needs. For Pulte, these considerations are then ‘taken to the street’ to determine what these consumers can currently get for their money.”
Let’s just hope the younger brackets will be able to save enough to get in the door.
Tom Kelly’s new book “The New Reverse Mortgage Formula” (John Wiley & Sons) is now available in local bookstores and on Amazon.com. Tom can be reached at news@tomkelly.com.
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