Turning the tables on young men, young women will be the demographic group to watch, as they come to the housing market better educated and with higher paying jobs than their male counterparts.

In an NAHB webinar on June 30, James Chung, president of Reach Advisors, cited some demographic statistics about the U.S. population that ought to have an especially upbeat ring in the ears of the developers of multifamily rental properties. However, he cautioned that the dynamics of the marketplace will be dramatically different.

“The demographic winds have clearly changed for residential real estate,” Chung said, “from massive tail winds to massive head winds ahead. The good news is that multifamily still has some tail winds ahead after the storm subsides, much more so than other sorts of real estate, but the wind in the sails will be different from the past.”

Less Money to Spend on Housing

Nobody quite knows for sure how the emerging economy will color the behavior of consumers, but as the U.S. population begins to get back on its feet financially it is unlikely that typical housing consumers will have the wherewithal they once had to spend on housing.

In terms of household income, statistics from the Census Bureau depict a decade in which the top 10% captured 50% of all U.S. earnings and the top 1% landed 25%, he said. In inflation-adjusted dollars, from 2000 to 2008 incomes were down for every age group up through the younger half of the baby boom, those aged 45 to 54, who saw their median income plunge almost 12%.

The younger baby boomers, the large majority of whom are well-established home owners, will be able to soften that blow by falling back on healthy amounts of home equity, according to Chung. But that won’t be the case for Generation Y members, who have feet planted in both the 15-to-24-year and 25-to-34 age groups, both of which experienced a decline in median household income in the 7% to 8% range through 2008.

Born roughly in the 1980s through 1990s, members of Gen Y had actually been spending more than prior generations at their age even though they had less income than those who had preceded them, Chung said. But their high-spending ways began fizzling out with the onset of the recession, he said, as the subsidies they had been receiving from their parents started “shrinking fast.”

The nation’s current job situation remains at detrimental levels for housing, Chung reminded his audience, with roughly 20% of the workforce out of work, underemployed or so discouraged that it has dropped out. Returning to full-employment will need some time, maybe not as long as the decade or more the Japanese took to recover following the collapse of their financial institutions in the 1990s, he said, but that scenario is a more likely outcome for today’s precarious U.S. economy than the rapid job creation that used to occur in the aftermath of recessions.

What young women are able to earn in the period ahead and how well they fare on their career paths will have implications for housing, he indicated, perhaps enabling them to pass more quickly than expected through the upper end of multifamily rentals into the first-time buyer market.

The amount of support that prospective renters and buyers receive from the economy remains a major unknown, but Chung laid out some demographic numbers and market research on Gen Y that builders should be digesting now.

U.S. Population Keeps on Growing

The best news the demographics have to offer housing is that the U.S. population, unlike in most other industrialized countries, will continue on an upward march, growing from 300 million five years ago to 350 million 15 years from now and 400 million in maybe 25 years from today.

However, part of the challenge, he said is that this boost will be coming from segments of the population that don’t have the highest incomes. The number of individuals of mixed race will be growing the fastest — by about 150% — over the quarter-century span when the population shoots from 300 million to 400 million. The mean household income of that group is below the income of whites and Asian Americans. The second fastest growing group by race will be Hispanics — with a surge of about 120% — and they earn far less even than Americans of two or more races.

Appearing prominently in this population mix along with aging baby boomers, multifamily developers definitely have to pay attention to Gen Y because it is accounting for the bulk of demand in the rental housing market. Those in the prime renting age bracket of 22 to 30 will grow 17% from 2000 until 2020, when they will peak at more than 40 million strong, higher than the previous peak in 1985 fueled by the boomers.

Members of Gen Y are coming under income constraints not only because they are young but also because they increasingly belong to lower-earning racial groups. Forty-five percent of this generation is not Caucasian.

Gender Counts

But Gen Y is also where gender comes into play and women are achieving more than men, reversing the income gap between the sexes in the workplace. In 1972, men were 1.5 times more likely to earn a college degree than women; today it is the exact opposite, he said.

Women working full-time receive only 79% of the pay men earn on average, but single women in their 20s working in an urban environment are earning 105% of what their male counterparts are earning, and in some markets their paychecks are 120% of the men’s, he said.

As a result, multifamily builders can expect to see more young women popping up, especially where they are renting a higher-end premium product, Chung said. Additionally, these women are taking a longer time to get married and have children, and this is “dramatically shifting the demand and need for housing, reshaping rental housing demand as they go through the cycle.”

Multifamily rentals will also be running into some competition from homeownership among Gen Y women, part of a more general trend in which single women are accounting for 20% to 25% of first-time home purchases. As the job market tightens up, Gen Y women are likely to be a primary market for first homes.

Even so, Chung indicated that Gen Y women aren’t always easy to read. Despite their higher incomes, “their preferences are different,” he said. In studies of their values “they are much more willing and thoughtful about making tradeoffs and less willing to spend more.” They are more fiscally conservative than young men.

They are also responsive to housing that provides security and that enables them to create their own environment.

“A feeling of safety and security is huge,” he said, “and not to be underestimated. It’s not just about lock systems, but ways you can signal safety and security, and beyond the four walls,” such as feeling safe when jogging in the morning or evening.

Little details are also important. “Young women are many more times likely to read for pleasure than young men,” said Chung. “As you shrink space, this has implications for what built-ins you want to have, what you put on the coffee table in marketing. The differences between the sexes are getting much bigger than seen in the past,” including how they spend their leisure time. “And we haven’t seen how this will be playing out.”

Consumers Are Up in the Air

With men and women alike, builders are going to have to grapple with “fissures in consumer behavior,” according to Chung. “This is the first time we have seen so many consumer decisions up in the air.” Consumers are rethinking their prior brand preferences, their aspirations, where they want to focus their spending and where they are shaving it.

Also bridging gender differences, members of Gen Y have “technological expectations well beyond the rest of us,” he said. “They are using that to customize their lives on line and off line; their relationship to the digital world is different.”

In a generational split with the baby boomers, Chung said that demand for outdoor recreational amenities is softening among Gen Y at the same time that baby boomers continue to strenuously push for it. “A shift is going on,” he said.

Chung said that there are now markets in the country where the dynamics look favorable for new residential development. However, “there is very little correlation between construction and fundamental demand drivers.”

The real correlation is between home building and the availability of credit, which is notably lacking at the current time. “People are on the sidelines waiting to build,” he said, and when the necessary capital does arrive there will probably be a spike. “Capital availability will open up faster for multifamily,” he predicted, “because the fundamentals in many markets are better for multifamily.”

Source: NAHB

www.dvwise.com

The new affiliation makes it even easier for home buyers in those states to find green homes and provides additional technical training, education and business opportunities for HBA members.

“I’m delighted to welcome the home builders in these seven states to the certification services offered through NAHBGreen,” said Dunn, who is a home builder in Point Pleasant, W. Va.,. “Our members are looking for an authentic, cost-effective and voluntary way to offer certified green homes to their clients, and they will find it in www.NAHBGreen.com.”

In addition to serving as a gateway to green home certification services, NAHBGreen-affiliated programs offer green building seminars and classes to their members, including the Green Building for Building Professionals class required for builders, remodelers and others seeking the Certified Green Professional educational designation from the NAHB University of Housing. Nearly 1,300 industry professionals have earned the designation since its February introduction.

Buyers seeking homes built with energy-, water- and resource-efficient features can call their local home building associations to find green builders in their area – or meet them at the Parades of Homes, Green Home Expos and other consumer events sponsored by affiliated programs.

Seven local HBAs also affiliated with NAHBGreen last week:

Huntsville / Madison County, Ala., Builders Association

Northern Idaho Building Contractors Association

Home Builders Association of Jackson, Miss.

Lake Norman, N.C., Home Builders Association

Wilmington-Cape Fear, N.C., Home Builders Association

Johnson City, Tenn., Area Home Builders Association

Building Industry Association of Clark County, Wash.

“The future of home building is green, and if you don’t get ahead of it now, you’ll be left behind,” noted Jeff Stokley, president of the Wilmington-Cape Fear HBA. His HBA is encouraging its members to become Certified Green Professionals and building up its ranks of home verifiers so builders can draw on their expertise as well.

Stokley himself has broken ground on a 1,132-unit development in which he expects each home to achieve at least NAHB silver-level certification. The development will open in the spring.

National Green Building Certification is administered by the NAHB Research Center, which trains and accredits local verifiers to inspect homes in their area. NAHB oversees the educational offerings, including the annual NAHB National Green Building Conference, which takes place May 8-10, 2009 in Dallas, and the NAHB National Green Building Awards.

Source: NHBA/Green Builders Info

DV Wise

August 21, 2009 – Builder confidence for conditions in the market for 55+ housing rose slightly during the second quarter, according to the 55+ Single-family Housing Market Index released today by the National Association of Home Builders (NAHB). The 55+ HMI notched up one point in the second quarter to a level of 15, due to a gain in the current single-family sales component of the index, which rose three points to 15.

The current condo index dropped a point to an index value of 12, while the rental index remained at 27. The future-expectations components of all three 55+ indicators – single-family for sale, condos and multifamily for-rent – fell during the second quarter. All sectors expressed some uncertainty over the next half-year as single-family builders’ expectations for the next six months fell from 26 to 23, the condo builders’ expectations index fell from 20 to 17, and the rental producers’ index of expectations fell from 35 to 32. As a further indicator of softness in the market, the level of traffic by prospective single-family buyers fell by two points over the previous quarter, from 14 to 12; condo traffic fell from 15 to 10.

“The survey shows that builders are still cautious,” said David Crowe, NAHB chief economist. “They may be seeing a few green shoots as some sales pick up, but builders understand that the consumer remains uncertain and awaits clearer signs of a housing and economic recovery.”

Both the single-family and multifamily 55+ HMIs are diffusion indexes, derived from quarterly surveys of builders and developers in which they rank their perceptions of the current conditions and expectations for the new future as “good,” “fair,” or “poor.”  The responses are used to create a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

As the market continues to absorb the existing homes being sold by seniors, builders who specialize in this sector expect to see pent-up demand for the user-friendly homes that these buyers and renters want.

“Most 55+ home buyers are current owners with considerable equity in their homes, but they are waiting to sell their home before committing to another purchase.  Historically low interest rates and good bargains in the new-and existing home markets will eventually bring these folks back into the market,” says Crowe. “Buying power has been scaled back by the financial crisis, but the demand for age-friendly housing is still there, and will be a big factor in housing for at least the next decade.” 

See this quarter’s numbers in chart form here. 

BOOMER BUYERS CAUTIOUS ABOUT RETURNING TO THE HOUSING MARKET  

Single-Family Sales See Small Uptick; Future Expectations Stall

August 21, 2009 – Builder confidence for conditions in the market for 55+ housing rose slightly during the second quarter, according to the 55+ Single-family Housing Market Index released today by the National Association of Home Builders (NAHB). The 55+ HMI notched up one point in the second quarter to a level of 15, due to a gain in the current single-family sales component of the index, which rose three points to 15.

The current condo index dropped a point to an index value of 12, while the rental index remained at 27. The future-expectations components of all three 55+ indicators – single-family for sale, condos and multifamily for-rent – fell during the second quarter. All sectors expressed some uncertainty over the next half-year as single-family builders’ expectations for the next six months fell from 26 to 23, the condo builders’ expectations index fell from 20 to 17, and the rental producers’ index of expectations fell from 35 to 32. As a further indicator of softness in the market, the level of traffic by prospective single-family buyers fell by two points over the previous quarter, from 14 to 12; condo traffic fell from 15 to 10.

“The survey shows that builders are still cautious,” said David Crowe, NAHB chief economist. “They may be seeing a few green shoots as some sales pick up, but builders understand that the consumer remains uncertain and awaits clearer signs of a housing and economic recovery.”

Both the single-family and multifamily 55+ HMIs are diffusion indexes, derived from quarterly surveys of builders and developers in which they rank their perceptions of the current conditions and expectations for the new future as “good,” “fair,” or “poor.”  The responses are used to create a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

As the market continues to absorb the existing homes being sold by seniors, builders who specialize in this sector expect to see pent-up demand for the user-friendly homes that these buyers and renters want.

“Most 55+ home buyers are current owners with considerable equity in their homes, but they are waiting to sell their home before committing to another purchase.  Historically low interest rates and good bargains in the new-and existing home markets will eventually bring these folks back into the market,” says Crowe. “Buying power has been scaled back by the financial crisis, but the demand for age-friendly housing is still there, and will be a big factor in housing for at least the next decade.

Source: www.nahb.org

DV Wise

www.nahb.org

DV Wise