San Francisco, Nov. 5 -- As the housing market rebounds, shifting population demographics will influence the existing and new built environment; at the same time, the down economy is impacting the demands of these same population sectors.
The expected chief influencers over the next few decades will be familiar: aging baby boomers retiring and Gen Yers entering the work force, as well as the continued influx of immigrants, according to a panel during the Urban Land Institute Fall Meeting.
What isn’t as certain are the expectations of baby boomers, who, according to the speakers, may not all want to live in golf course communities in warm climates as many builders may have thought and built for. Many boomers prefer to stay closer to home, and, because they’re healthier, are able to age in place longer. The idea of moving farther out from urban cores also is less appealing.
Those boomers who are trying to downsize are finding it difficult to near impossible to sell their existing homes, both because of the economy and because buyers most likely to buy a trade-up house—older Generation Xers—either can’t afford to or don’t want what’s being sold.
THE NEXT GEN
Like the baby boomer generation, Generation Y (echo boomers) will have a tremendous impact on housing—but likely in much different ways and at a more gradual pace. This group is where the next round of growth will largely come from, said Deborah L. Brett, president of Deborah L. Brett Associates, noting that Gen Yers will outnumber boomers within the next year.
Problem is, as Gen Yers get ready to buy, many will not be able to afford homes. This group has been spending more discretionary dollars than previous generations, said James Chung, president of Reach Advisors, but their incomes are not comparatively higher, which means they are receiving help from their parents, a funding source that is tapering off due to the economy.
Meeting the needs of this swollen population segment will require greater availability of smaller, moderately priced housing, as well as Class B apartments, in areas with plentiful activities and lifestyle amenities. Generation Y buyers will place more importance on community character, walkability, and eco-conscious options than on lot and house size.
“The suburbs are not dead, but cities will flourish more than they did 25 years ago,” Brett said.
Also undergoing a shift is the notion of “household,” which can be defined less and less in the historical sense as the number of former “others”--“singles living alone” and “unmarried people living together”--is climbing steadily.
As is the gender influence. “Women will become the majority of the workforce this month,” said James H. Johnson, director of the Urban Investment Strategies Center at the University of North Carolina. This trend is delaying childbirth, which in turns impacts home size.
And while the population is expected to grow 3% between 2010 and 2020, household growth actually will be slightly less than in the decade before (12 million new households vs. 12.3 million). This is partially attributable to fewer college grads being able to move out of their parents’ houses right away and fewer being able to live alone.
At the same time, the flow of immigrants will continue to climb, albeit more slowly than the past few years. The number of immigrants grew from 31.1 million in 2000 to 37.3 million in 2007, said Johnson.
By 2050, Hispanics will make up 29% of the U.S. population, up from 14% in 2005; in contrast, whites will move from 67% of the population to 47%. Fueling this trend is the fact that Hispanics are younger (median age of 27.3) than whites (40.6); the Hispanic population also is the only segment that is replacing itself in terms of number of children.
The speakers also noted the following trends:
Household income will remain stagnant, Brett said, an issue that was occurring even before the downturn but didn’t seem to be because of our loose spending habits. Income growth has been strongest in older age groups, which means there’s less income available to spend on housing.
Job growth will be key to significant housing shifts, but unfortunately the bottoming out of job losses hasn’t occurred and it will be some time before the loss is recovered, said Brett.
The cities likely to be most attractive to Gen Y include Seattle; Washington, D.C.; Raleigh-Durham, N.C.; Boston; Chicago; Denver; Dallas; Austin, Texas; and Portland, Ore.—suggesting that climate has little to do with preferences as opposed to job availability (especially tech) and lifestyle opportunities.
Immigrants are settling into a greater diversity of regions
Greater diversity of household types: singles with roommates, non-traditional families, more minorities.
Changes in workplace: delayed retirement, small-scale entrepreneurship, working from home, shared office space, less travel (more Web conferencing).
Little to no growth in purchase power.
While the shifting populations mean making adjustments, they also offer sales opportunities for developers who respond to these new needs. Pent-up demand is building, said panel moderator Lynn Thurber, chairman of LaSalle Investment Management, and she reported a general feeling of optimism among conference speakers and attendees.
“With all the bad news over the past two years,” Brett concurred, “positive demographic indicators offer a reason for optimism.”
Katy Tomasulo is Deputy Editor for EcoHome.