2017 Executive Summit keynote speakers share insights into millennial and baby boomer home buyers
Baby boomers shaped a half century of home building and still represent the buyer demographic with the most discretionary income. Millennials are a force to be reckoned with, if for no other reason than sheer numbers. At 76.7 million, they account for 24 percent of the nation's population.
But millennials also are reshaping the established pattern of life stages. In his keynote presentation to 2017 Executive Summit attendees, Kantar Futures global marketing consultant and author J. Walker Smith noted that traditionally, people moved in a pretty straight line: They started out living with their parents, then got an education, started a career, got married, bought a house, started and raised a family, and their children left home.
With millennials, the straight line has become more like a hopscotch board: live with parents, get an education, travel abroad, move back home, cohabit with partner, have children, buy a house, get married, go back to school, change careers - you get the idea.
But then, this is a generation that grew up in a boom-and-bust period. If they’ve learned anything, it’s flexibility and resiliency. While boomers grew up in a generation that hit the ground running straight out of high school in a world of financial opportunity and pinned their hopes on hard work, millennials have gotten a slower start. They’re focused on financial workarounds; their aspirations rest on flexibility.
They’re postponing major milestones, such as marriage and starting a family, so it’s understandable that they’re also getting a later start on buying a house, too. A big reason for that? Student debt. According to Student Loan Hero, today’s average college graduate has $37,172 worth of student loans to pay off.
With that hanging over their heads, it’s no wonder that the majority of millennials struggle to save money for a down payment and worry that they won’t be able to qualify for a mortgage. Yet, they still strongly want a home of their own: 83 percent of millennials consider homeownership a sign of success and accomplishment. As a result, they’re open to considering new paths to ownership. A whopping 69 percent say they would be interested in a rent-to-own model.
Designing homes to fit emerging needs
What kind of house do they want to buy? According to Steve Moore, senior partner for BSB Design, it’s focused on the experience. Future design influencers include technology-based services such as Alexa, smart drones, streaming video and music services, virtual reality, home rentals, such as Airbnb, and ride-sharing (Uber/Lyft). Speaking of Uber and Lyft, the access to a vehicle when transportation is needed — without the expense of ownership — speaks to the millennial maxim of “Live large, carry little.” If that’s the new home buyer, do builders really need to offer houses with two- and three-car garages?
It’s an intriguing thought. Houses with one-car garages (or however the buyer wants to use the space) can fit on narrow lots. That helps make them more affordable to these cash-strapped buyers. The challenge is getting such communities approved by local government.
While millennials represent the wave of the future, baby boomers offer tremendous opportunity right now. Far from heading for nursing homes, boomers represented 31 percent of home buyers in 2016, according to the National Association of Realtors. This is the generation that will have most of the wealth for some time to come, and with the mindset of “70 is the new 50,” they’re looking for more space than previous generations; roughly half want a house between 2,000 and 3,000 square feet. About 1 in 5 want a house between 3,000 and 4,000 square feet.
Naturally, economic forces drive housing as much as demographics, and the Executive Summit attendees paid close attention to the 2017 economic forecast presented by keynote speaker Gregory Miller, who recently retired as chief economist for SunTrust Bank. He says the trend through mid-2017 is a 3 percent growth in the economy, which hasn’t happened in more than a decade. To reach that, several things have to happen. Those include baby boomers continuing to spend money, millennials saving and spending —they aren’t purchasing durable goods, Miller noted — drug price inflation needs to fall from 8 percent to 2 percent, and U.S. companies need to continue to invest in growth and continue to hire employees.
Miller predicts the Federal Reserve will raise target Fed funds three times in 2017: 1.5 percent by year-end 2017; 2.2 percent at year-end 2018. He foresees mortgage rates averaging 4.7-4.75 percent by the end of this year and between 5.2 and 5.25 percent at the end of 2018.
One item to watch out for, Miller noted, is that the current economic expansion is 7 ½ years old. The typical recession is 5 years; “we should have had one by now,” he said.
These were just three of the many outstanding speakers at the 2017 Builder Partnerships Executive Summit. Response was so positive that the theme for the 2018 Executive Summit already has been announced: “How to Achieve Peak Performance and Superior Profitability.” Plan now to be part of this industry-leading event on March 6-8, 2018, at Beaver Run Resort in Breckenridge, Colorado.