Gen Y: The Next Wave of Home Buyers

The next wave of home buyers is building momentum and it may be a tsunami-size wave.  But will it be the housing industry's salvation?  Some, like me, are speculating that it will be but only time will tell.  Overall, job growth is important (a key component to a sustainable and robust real estate recovery), but a more important trend is the current generational shift underway whereby echo-boomers are beginning to influence every facet of the US economy from marketing and advertising to real estate.  Their influence has grown steadily as they come of age and begin to consume more and more.  Currently, this group's buying power is estimated to be $200b annually, and this figure will only grow larger over the next decade.  As 80M gen Yers, roughly 25% of the US population, dig deeper and deeper into the workforce many changes will take place.  Standing between them and the corner offices, however, will be their own parents who have maintained a tight reign over corporate America and local, state and national government for decades.  Watching how this unfolds will be interesting as one group, the baby-boomers, seeks to protect what they have while the other group, the echo-boomers, simultaneously seeks to obtain what it wants.

Figuring out what the gen Y group wants will be a major challenge for all industries, including real estate.  Right now, this group is driving much of the growth in multi-family.  As a result, multi-family has experienced a boom.  But what is the 18-32 year old demographic really looking for.  Determining what they want, of course, is very important and starts with understanding how gen Y differs from gen X and their baby-boom parents.  Some research suggests the following characteristics of gen Y: 

• ethnically diverse
• better educated
• tech savvy
• charitable
• social
• environmentally conscious
• pet friendly
• active

Given these characteristics, residential builders are aiming to adapt their construction to fit
gen Y.  What is this going to look like?  It could mean building communities that have wi-fi hot spots, walkability, mixed-use, smaller floor plans, more open space, amenities that support an active and social lifestyle, high end finishes, and access to outdoor spaces.  In a nutshell, amenities that accommodate a balanced work and play lifestyle will be better suited to gen Y.  Today, this group is driving a boom in multi-family but soon will make the decision to own versus rent.  When they make this decision will depend on many factors.  At that time, the next generation of home buyers, gen Y, will drive the housing recovery.  Meanwhile, the boomers will be downsizing.  The end result will be a rebound in housing even if unemployment remains higher than it has during previous economic expansions.  The rebound will be especially fun for those businesses that are poised to meet the demands of gen Y, the next drivers of our economy.  Until then, real estate growth will be strongest in those areas of the country with the lowest unemployment rates, at least 2% or more below the current national unemployment rate. 

Just like all retailers, builders and developers are taking note of the next wave of home buyers, but appealing to gen Y will not be easy.  In fact, the tendency to guess at what this group deems important or superimpose or overlay one's own ideas about what is important will not work.  Products that are embraced by gen Y will have to genuinely reflect their own tastes and lifestyles, not the tastes and preferences of the preceding generations. This will be as true for real estate as it is for technology products, etc.  Like it or not, the torch has been passed and gen Y will lead the next renaissance in real estate.  In fact, it has already begun!