A Recent article in US World and News Report breaks down the different demographic groups and analyzes the unique choices and challenges each group has in the current real estate market.
The two most interesting points to me, revolved around 1) GenY (late teen to early 30’s age group) losing faith in the value of owning a home and coupled with their interest in living in more urban areas becoming a class of permanent renters and 2) The Baby Boomers in the 45-55 age group unable to sell their homes in the suburbs to downsize. Negative equity and a much smaller pool of buyers to sell to make these homes harder to unload.
My thoughts on the Gen Y group is that if they lock themselves into renting now – later in life they may find that the market has passed them by. As the economy changes, interest rates rise and costs continue to escalate they may be unable to buy or at least unable to buy in the areas they most want to live in. Not only will this create a permanent class of renters but I wonder about the long term economic impact of, say 20%, of the population not buying property?
As far as the baby boomers being unable to sell their properties at what they paid for them – this is bound to have a negative effect on the retirement plans of these homeowners. Perhaps fewer vacation home purchases and a delay of retirement all together will be the result. The article mentions a drop in the interest for retirement centers as people live longer and healthier lives. I wonder what will happen to the suburbs as these properties eventually sell for much less or are abandoned all together.
Styles do change and new things become desirable leaving previous “hot ticket items” in the dust. I remember in the early 1980’s I was living in the “suburbs” in a nice home that was built in 1973. It has 4 bedrooms and 4 baths along with a cavernous living room and a small formal dining room plus an eat in kitchen. I was pretty comfortable and I thought the house was pretty upscale. One night in the early summer I decided that I would take a walk through the woods to a new home development that was being built. In those days homes under construction could be left unlocked and I decided to walk through a few of them. I recall being completely flabbergasted at what I saw. There were master “suites” with huge walk in closets and bathrooms as big as my entire bedroom and bathroom put together. Kitchens were big and roomy not little after thoughts off the dining room. Building styles had begun to change and as we would all soon see this was just my first glimpse of the new style of home for the 1980’s. These days no one would look twice at a home like that, it is standard issue in the American suburbs.
I believe we are the cusp of another major change in how Americans live and what they want in their homes. My best take, on the trends cited in this interesting article, are that midsized urban centers with a high quality of life are going to be the “hot” properties in the very near future. Large suburbs far from amenities and work places will suffer as the next generation of home buyer no longer considers them desirable or in fashion.