Wednesday, June 25, 2014

Housing the Echo Boomers - Next Big Real Estate Opportunity ?

Originally published on on December 21, 2011.

 Tim Smith blogs on the "Echo Boom", also known as Generation Y (Americans born between 1980 - 1995).  His most recent guest post indicated that Echo Boomers might not be that excited about becoming homeowners.  There are a lot of them and they will have to live somewhere, so there may still be opportunity in housing them.

     Seize the Next Biggest Financial Opportunity

Are you an investor in real estate?  Are you a real estate agent?  Are you a homeowner looking to sell?  Are you trying to rent a nice apartment complex?  If you have any interest in housing, you may have cringed when reading about the Millennial attitude toward housing.  However, whether Echo Boomers rent or buy, they will need housing, and there are 80 million of them.  In other words, recognizing their demographics and preferences will separate the winners from the losers and that has huge financial implications in a generation as large as the Echo Boomers.

Who Will Buy and Who Will Rent?

In the past, I’ve argued that single moms and females will produce the strongest demand for housing in the future.  Then a few articles I covered mentioned a different take: the new renter is probably a single mom.  However, single moms and females of the Millennial generation listed owning a home as a financial goal more than males, even though males are more likely to be homeowners (by a 7% margin).  Married Echo Boomers also reported home ownership as a financial goal (approximately 21% of Echo Boomers are married).  As this generation matures, I’d expect the strongest demand to come from these three segments of the Millennial generation.

Many single males stated that home ownership was not a financial goal.  A few of these male renters wanted to buy land and build their own home outside of the city (approximately 10-15%), while the rest seemed satisfied with renting.  Those in the real estate industry should be aware that renters are a profitable group, if you build housing that renters want.

Are there exceptions to these trends?  Of course, and if the Millennial generation sees its marriage rate increase, there will be a growing demographic to sell homes to.  In some cases Echo Boomers may opt to live with relatives or friends rent-free due to their economic circumstances.  But even the ones who lived with their relatives or friends told me that they planned to be independent soon.

What Will They Want?

    For now, most of Generation Y seem to want modest homes, the demand of which may be indicative of their young age.  But it might also represent a demographic shift against large housing that is often overpriced and unnecessary.  Because many Echo Boomers don’t have or make significant money, a small house offers the ability to save on energy.  Other traits of housing that Echo Boomers want:
            ·         Some Echo Boomers prefer to drive less or take public transportation.  This indicates that they would prefer housing that is close to work, school and social areas.  Keep in mind, that close housing will save them money so that they can afford other things in the area (an opportunity to attract businesses).
            ·         For apartments, modern designs with social areas are replacing old apartments (and this will continue to grow).  An example of this in terms of design, an example would be to replace carpet with hardwood floors.  Builders and real estate developers can also attract businesses that offer social areas, like coffee shops, to open near the area.
            ·         Since some Echo Boomers lack financial resources, always consider how your housing saves them money.  Is it small and efficient?  “This place will save you money on bills.”  Is it close to their favorite places?  “This place will save you money and time on transportation.”  Does it offer their favorite activities?  “This place offers a gym without an additional cost.”  Always create win-win situations – it communicates that you value your customers.

Time Will Be the Ultimate Judge

            While Echo Boomers may mature like older generations and buy houses in the suburbs, they may not.  Time will answer questions about the housing demand from the Millennial generation, and what type of housing they’ll prefer.  Either experts are right when they state that Echo Boomers are extending adolescence, or the zeitgeist of “making it” is changing for this generation.  For now, anyone with a financial interest in real estate should pay attention to trends and find ways to meet their consumers’ needs.  And best of all, you can win with the renters or the owners – you’re not stuck with one opportunity

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