The influencers in your market are gradually changing, and those changes could have a significant effect on your business over the next 10 years. According to a newly released report by the Urban Land Institute and Johns Burns Real Estate Consulting, the U.S. is expected to add 12.5 million net new households over the next decade (from 2016 to 2025) — nearly double the 7 million formed in the previous 10 years. That means a flood of new potential clients is on their way — and they are predicted to transform both residential and commercial markets.
The report, Demographic Strategies for Real Estate, highlights how four demographic groups in particular will be key players in the housing market into 2025: women, immigrants, retirees, and young adults.
The demographics are changing dramatically everywhere. If you don’t pay attention, your pool of clients is going to dwindle.
These four groups are expected to drive the next decade’s real estate markets, and these tips will help you help your agents prepare for them.
Women’s buying power is strengthening as their workforce numbers rise sharply. Women now earn 58 percent of all college degrees nationwide. They earn more than their spouses 38 percent of the time. By 2025, the number of women in the workforce is expected to jump to 78 million — 8 million higher than the level in 2015.
The working woman today is different than previous generations. Forty years ago, 68 percent of women in their late 20s had both a husband and child. Today, that percentage has plunged to just 22 percent. Women may delay marriage or child-rearing to focus on their jobs first. But single women have shown they’re not afraid to step into home ownership alone. Single women accounted for 15 percent of all home purchases in 2015, while single men made up 9 percent.
Community impact: Women are expected to have a larger influence on the commercial office market. Female executives likely will have more of a say in office space selection, given their increasing dominance in the workforce. They’ll likely favor shared space and e-commuting because of the financial savings and increased flexibility. Therefore, commercial markets may see fewer square feet per employees as “companies transition to a hotel-like atmosphere where people ‘rent’ a desk for the day,” the report says.
Immigrants are expected to comprise more than half the U.S. population growth by 2023, if current trends continue. In 10 years, more than one of every seven residents will be an immigrant. Many of the immigrants coming to the U.S. are highly educated middle- and upper-class families with substantial buying power. “These consumers are vital to the economy, but common wisdom about the ways they form households, buy homes, and behave in the marketplace no longer holds,” according to the report. “Immigration has shifted from impoverished refugees walking across the border or landing via boat to affluent middle- and upper-class families fleeing their native lands after decades of amazing economic growth.”
Community impact: Households may get bigger. Multigenerational family living is defined as households that include two or more adult generations. Asian and Hispanic populations are more likely to live in multigenerational family households than other ethnicies. And as their numbers have increased in the housing market, so has the number of these households. Multigenerational households soared to a record 60.6 million, or 19 percent of the U.S. population, in 2014. As more people live under one roof, there may be an increase in demand for homes with two master bedrooms, separate entrances, garage conversions, or even separate outdoor spaces.
Baby boomers aren’t softening their buying power into their golden years. But they’re very diverse in how they’re exercising it in retirement. By 2025, 66 million Americans will be over the age of 65. That is 38 percent more than in 2015. Young retirees’ needs and lifestyles are varied, which can create a variety of customer segmentations within this group. For example, 19 percent of 65- to 69-year-olds still work full time. Those born in the 1950s are still maintaining active lifestyles and are spending their unprecedented net worth, often on real estate.
Community impact: Retirees may help foster more mixed-use developments. A report released by the Brookings Institution found that walkable, mixed-use developments could even help reduce the effects of disabilities many retirees face as they age. More developers are looking at retirement buildings that are dense, urban, and centered near retail sites and services. Also, the rise of the sharing economy and short-term rental sites may also pave more ways for retirees on fixed-incomes to profit off their real estate. For example, sites like Craigslist and Airbnb are making it easier to rent out rooms. That said, “renting empty rooms could steal demand from hotels, apartments, homebuilders, and local municipalities who rely on hotel taxes and development fees,” the ULI report warns.
4. Young Adults
The millennials are expected to drive the majority of new household growth over the next decade, although more slowly than their predecessors at forming new households. They’ve delayed getting married and starting families. Also, high rents, student debt, and the Great Recession have been blamed for curtailing their leap into home ownership. But they are coming. The 44 million 18- to 27-year-olds born in the 1990s will lead the majority of new household growth over the next decade, ULI predicts. They are expected to create 14 million households by 2025.
Community impact: Prepare for a newly labeled type of housing to enter your community: The surban. It’s a term coined by John Burns Real Estate Consulting to describe the combination of urban in-demand traits (such as public transportation and proximity to employment) with suburban living (including quality schools, privacy, and larger home sizes). “Surban” developments are expected to rapidly grow, transforming shopping centers into areas that combine housing and retail that offer walkable, convenience, and car-free living. Municipal leaders gradually are responding with zoning changes to permit more of these developments. The report also notes another community impact from the growing millennial population is an uptick in rental housing, townhomes, and smaller homes with small to no yards.
For information on how to prepare for these groups, continue reading here.