After rising for four consecutive years, the average size of new homes declined in 2014. The expectation for 2015 is for this receding trend to continue, as more Millennials enter the housing market and demand smaller, more affordable homes. Strong job growth and new lending rules that will allow for smaller down payments and lower mortgage insurance premiums will help drive demand from these buyers.
So where do these mostly first-time buyers want to live?
- 75% want to buy a single-family detached home.
- 66% would prefer to live in the suburbs.
- 24% would opt for rural areas.
- Only 10% would choose to live in the central city (a larger share than among Gen X’ers, Baby Boomers, or Seniors, but still a minority share).
What home features top their wish list?
- Laundry room
- Exterior lighting
- Energy-efficient appliances and energy rating for whole home
- Storage options like linen closets, walk-in pantry, and garage storage
In addition, most Millennials would be seriously influenced to move to a community if it had:
- Park area
- Walking trails
- Outdoor swimming pool
If faced with a choice between a highly energy efficient home with lower utility bills over the life of the home, and one without those features costing 2-3 percent less, the vast majority of Millennials (84%) would opt for the energy-efficient home. Translation: this generation will understand and accept the cost of energy-efficiency options as long as the benefits are clearly spelled out in dollars and cents.
All of these findings were presented during the 2015 International Builders’ Show in Las Vegas. A complete copy of the presentation can be downloaded here .
New NAHB research shows that millennials tend to buy homes that are smaller, older and less expensive than homes bought by older generations. Being the youngest home buyers with little or no accumulated wealth also affects how millennials shop for and buy their homes.
(View a Dec. 10 Fox Business news report where NAHB CEO Jerry Howard discusses millennial home buyers and the housing landscape.)
The majority of millennials are buying homes for the first time in their lives. Three out of four millennials who purchased a home were first-time buyers, but a quarter traded their existing homes.
Compared to older generations, millennials are less likely to buy a new home. Less than 9% of millennial home buyers bought a new home. The share was close to 12% among older home buyers.
More than two-thirds of millennials who bought homes purchased single-family detached properties. Nevertheless, compared to older home buyers, the millennial generation shows a slightly higher preference for multifamily condominiums. Close to 9% of millennial home buyers bought a multifamily property compared to less than 6% of older home buyers.
Consistent with being the youngest and largely first-time home buyers, millennials tend to buy homes that on average are smaller and concentrated in the lower price ranges compared to homes purchased by older generations. Half of all homes purchased by millennials averaged less than 1,650 square feet of living space and cost less than $148,500.
The most common reason for moving reported by millennial home buyers is to establish their own household, followed by the desire to have a larger unit and own it.
When choosing a particular home, millennials are more likely to let financial reasons influence their choice, while older generations consider the right size most often.
When selecting a new neighborhood, the right house most often influences the decision for both millennial and older home buyers. However, millennials are more likely to also pay attention to proximity to work and having good schools.
Compared to older generations of home buyers, millennials are more likely to finance home purchases out of current income rather than out of accumulated wealth, and when taking out mortgages they are more likely to use unconventional zero-down mortgages.
The research is based on the 2013 American Housing Survey (AHS), the most recent release of this ongoing biennial housing data collection. Only housing units purchased in the two years preceding the 2013 AHS interviews are considered. Housing unit characteristics are tabulated by the age of the household of head, a person in whose name the housing unit is owned. Millennial home buyers are householders that were 33 years old or younger in 2013 and bought homes within the two years prior to the AHS interviews.
A recent survey of younger Americans illustrates that the goal of homeownership remains an important part of the American Dream.
The economic future of Millennials is key to the future of housing demand. A record number of individuals aged 18 to 34 years are delaying household formation as a consequence of the Great Recession. In a recent Eye on Housing blog post, this situation was referred to as the “Great Delay,” as slow wage growth and rising student loan burdens have reduced attainment of traditional goals associated with the American Dream, including marriage and homeownership.
An important research question is whether these delays represent deferrals due to economic conditions or true changes in preferences and goals.
A recent survey from the Demand Institute provides new evidence. The study surveyed 1,000 18- to 29-year-olds about current conditions and market preferences. The findings indicate that homeownership remains an important long-term goal.
Among the findings for Millennials:
- Over the next five years, 8.3 million new Millennial households will form.
- 74% plan to move over the next five years, with the top reason being need for better housing.
- 64% expect to be married in five years and 55% expect to have kids.
- 75% believe homeownership is an important long-term goal and 73% believe ownership is an excellent investment.
- 24% currently own a home and another 60% plan to purchase.
- 36% expect their next home to be a multifamily rental, while another 36% expect it to be a single-family owner-occupied residence.
- 48% prefer their next home to be in the suburbs, while 38% want urban locations.
- 88% own a car.
- Student loans do delay homeownership (but college raises lifetime incomes).
- 44% think it will be difficult to qualify for a mortgage.
For more details, read the survey findings from the Demand Institute.
By Juli Bacon
If you are used to working with your hands and using tools for your craft, you may wonder how you are going to teach the younger generation the tricks of the home-building trade. If you are in a supporting business in the construction industry, you may have also found yourself frustrated by the new generation’s constant reliance on technology. You watch them texting on their phones, checking their Facebook page, playing on their iPads and watching television all at the same time. Electronic gadgets are their tools.
Rather than think of this as a problem, think of it as an opportunity. Generation X (Gen Xers) and Generation Y (Millennials) are your new workforce. Learning to work with their unique style and tapping into their specific skills just may give you the edge on your competition as labor shortages become the norm in the construction industry.
Looking back through the generations, I imagine that we would hear some common phrases used in one form or another such as: “kids today….”, “I don’t know how this company will survive with the next generation”, “This new generation doesn’t know what work is!” The cold hard truth for current and future business owners; however, is that if you do not learn how to work with each “new” generation, your company will not survive. The construction industry can ill afford to miss an opportunity for new labor. Those who take the time to listen and learn from the Gen Xers and Millennials will have an advantage when the labor shortage is hitting their competition. If you, as an employer, take the time to learn what drives them rather than making assumptions about their work ethics based on their seeming desire for “wasting time” on Facebook and other technology, you will increase your chances of attracting and retaining employees.
Understanding some basic background, characteristics and traits of each generation is the first step in attracting and retaining the Gen Xers and Millennials. Of course, employers need to look at the individual and avoid stereotyping, as each person’s upbringing and unique experiences shape the way he or she lives and works.
Gen X: No Hand-Holding Needed
Gen Xers, typically born between 1965 and 1977 (some say up to 1980), are the children of Baby Boomers, a generation that believes in working hard, paying your dues, and working your way to the top with or without an education. Some Baby Boomers became teenagers in the 1960s and created their own upheaval in America with their “wild” ways. However, they were mellowed by double-digit unemployment, starting families and new responsibilities.
Gen Xers’ parents typically lived to work and were defined by their work. They were dedicated to their jobs and loyal to their employers. Gen Xers were the first children to grow up with two working parents. The first latchkey kids, they came home from school to empty houses. They had to learn to be self-reliant; they did their homework without help, took care of their younger sibling(s) and cooked for themselves. They saw their parents divorce, often more than once. Their parents’ loyalty to their employers crumbled with corporate scandals that depleted their retirement accounts.
Gen Xers were shaped by myriad events that occurred while they were growing up; from the assassination of Robert Kennedy to the fall of the Berlin Wall; from the beginning of the AIDS crisis to the savings and loan crisis; from the Vietnam War to the Persian Gulf War. They saw the rise of the computer age. They remember rotary telephones, eight-track and cassette tapes and DOS-based computer systems.
Generation X Characteristics and Traits
- Self-reliance, resourcefulness and working independently
- Adaptable to change
- Little patience for meetings without purpose
- Comfortable with technology
- Desire for a challenging workplace with accountability
- Emphasis placed on the quality of the work and accomplishing the work rather than the number of hours worked
- High value on family and personal time and working to live rather than living to work. Seek companies with work/life benefits.
- More likely to ask for flexible schedules to meet family needs or ask to work from home
Employers can attract and retain Gen Xers by:
- Creating a work/ life balance in their workplaces. Employers need to set aside the idea that if they don’t see the employee, they aren’t working. Gen Xers have strong work ethics, but will not sacrifice their family life for it. They like the ability to work from home if needed.
- Challenge them with interesting projects, make sure they understand the deliverables, performance measures, and then get out of their way. They may find a faster, more efficient way of completing the task that increases production and efficiencies.
- Invest in technology to help them complete their jobs in a timely manner; take time to ask what tools the Gen Xers would use.
- Appoint them as team leaders and let them do the leading.
- Allow for flexible schedules, ability to work from home as it pertains to their jobs. Reward them with additional paid time off.
- Motivate by direct positive feedback, while providing clear direction and goals to be met. Quarterly, to annual, performance evaluations are important. However, Gen Xers will need immediate feedback on their assigned projects to keep moving and complete their work.
Gen Xers are loyal to their employers, provided their employers allow them to work to live, but will jump ship if they feel that balance is being interfered with or being taken away from them.
Gen Y: Let’s Do This Together
Millennials, born in the mid to late 1970s up to mid to late 1990s, have been referred to as the “Me” generation. Millennials are the children of late-end Baby Boomers and early Gen Xers. Their parents negotiated with them and gave them choices rather than consequences. They were told everything they did was great, and everyone on their team received a trophy. Their parents kept them busy with endless extracurricular activities and team sports. They often have good relationships with their parents and may live with their parents until they are married. They went to college and their parents paid for it.
They don’t just use technology, they embrace it. They grew up with it, use it regularly, rely on it, and seem to be unable to live without it. They often work to buy more electronic gadgets and to play. For Millennials, technology is an integral part of their lives and they use it to make their life more pleasant and to make their work easier.
Millennial Characteristics and Traits:
- Often those that are “caught” on Facebook or texting at work, but they are actually managing their workload, as well as managing their busy electronic social lives.
- Make good team players and like working in teams, but that may not be a face-to-face team. They may want to work via web-based tools such as Skype or video conferencing. They will instant message or text a colleague in the next cubicle rather than get up and meet with them face-to-face.
- Appreciate mentors that don’t preach to them, but rather those that gently guide them with questions and choices.
- Need regular, and consistent, positive reinforcement on a daily, weekly, or monthly basis. They need to be told when they are doing a good job.
- They ask first about the money or benefits of a job rather than about the company.
- Lack loyalty to an employer that stifles their creativity or will not allow them the use social media or electronic devices in the workplace.
Attract and retain Millennials by:
- Creating social media and electronic media usage policies, with generous allotment of time for personal use, provided their essential job functions are completed in a timely manner.
- Create a team-based atmosphere and provide recognition and reward for a job well done.
- Invest in cutting-edge technology with input from the Millennials.
- Assign mentors to new employees, with specific instructions to the mentors on how to guide the new employee.
- Enlist Millennials in researching new products, procedures and best practices. They may find a new program that streamlines your production process or more accurately estimates the amount of material you use on a job.
- Ask them for their input on new benefits and compensation plans and offer them something that allows them the freedom to “work to live”.
- Engage them in assisting with social media and other e-media marketing.
- Motivate them with positive reinforcement and constructive correction, rather than criticism.
If you are a Baby Boomer, or an early-era Gen Xer, you are rolling your eyes about now. You are thinking that you don’t have time to babysit. But this is your new workforce. Tap into their knowledge and use of technology. Teach them that the tools of your trade are as necessary to construction as their electronic “tools” are to them. Your new customers are Gen Xers and soon will be Millennials; you will need like-minded individuals to help you reach your target audience and to speak the new customers’ language.
Teach them the trade skills of your business, while allowing them to put their unique spin on the execution. They can learn from you as well; for instance, there is value to staying focused on one task at a time and completing without interruption. New ideas and new approaches are crucial to the survival of any business and especially for construction. You will always need the artisans, but you need the new ideas and excitement of the current generations.
The construction industry is facing serious labor shortages. Embrace the change now and get used to it because Generation Z— as the toddlers who are playing with their parents’ smart phones are called — will be entering the workforce before you know it. Who knows what challenges they will bring to the table.
This article first appeared in Building Women magazine, a publication of NAHB Professional Women in Building.
A recent study from the National Association of Home Builders (NAHB) shows variations in home buyer preferences with regards to home size when it comes to age, race and ethnicity.
NAHB’s “What Home Buyers Really Want,” surveyed more than 3,600 home buyers across the country on various characteristics of new homes. Based on the results, the median desired home size is 2,226 square feet. However, a closer look at the data broken down by buyer characteristics shows significant differences in how large a home different types of buyers want.
Age plays an important role in a buyer’s preferences, with the amount of space requirements dropping steadily as the age of the buyer increases. Among those younger than 35, the desired home size is 2,494 square feet, compared to 2,065 square feet among those 65 and older.
“The building industry wants to know how much space buyers want in their homes” said Rose Quint, NAHB’s assistant vice president for survey research, and one of the study’s authors. “This study provides us with new insight into the home size preference of home buyers as a whole, but also across different demographic groups.”
Race and ethnicity also impacted home size preferences, with minority buyers desiring more space than White, non-Hispanic buyers. White, non-Hispanic buyers report wanting about 2,197 square feet, while Asian buyers desire 2,280 square feet, Hispanic buyers want 2,347 square feet, and African-American buyers prefer 2,664 square feet.
According to the U.S. Census Bureau, after peaking in 2006, median home size fell in 2007, 2008 and 2009, but reversed course and has risen for the past three years. Estimates indicate that the median size of all single-family homes started in 2012 was 2,309 square feet, and the average was 2,521 square feet.
The primary reason for the reversal in home size actually built has to do with buyers’ ability to access credit. Due to overly stringent mortgage lending requirements in recent years, the less financially-solid buyers have been shut out of the market. As a result, homes built in the last few years, largely reflect the preferences of those who are still able to obtain credit and put down larger down payments—typically wealthier buyers who can afford larger homes.