America’s changing demographics impact almost every business in the country, creating opportunity for those willing to act. Those who don’t can fall quickly behind. Exciting new businesses, such as Uber and Airbnb, capitalized on these demographic shifts, and similar conditions exist in housing. But with the overwhelming volume of data and opinions out there, how do builders know where to focus their attention?
Well, during a standing-room-only NAHB presentation this spring, Chris Porter shared his findings on demographic trends and provide clarity for which generations and influences will have the greatest impact in the future of housing.
A New Way To Look at Housing Demographics
The presentation, based on Porter’s book, “Big Shifts Ahead: Demographic Clarity for Businesses,” with co-author John Burns, argued that broad demographic shifts will reshape housing in America in the next decade. Who will they be? Female executives, affluent immigrants, growing numbers of younger and older workers and a ballooning retiree population will have a profound influence on residential real estate in the U.S. over the next 10 years.
Interestingly enough, that data started by redefining generations.
“We redefined the generations by decade born, giving us much more clarity on the generational shifts occurring in America,” explained Porter. “The terms Baby Boomers, Gen X, and Millennials make sense when describing decades-long shifts in birth rates. However, a 31-year-old Millennial father and a 16-year-old Millennial high school student share little in common. Retired 70-year-old Baby Boomer grandparents collecting Social Security and 53-year-old Baby Boomers struggling to save enough money to put their high schoolers through college also have little in common. We all identify much more with people our own age and in the same stage of life.”
For example, the duo calls Baby Boomers the Innovators because their generation has created so many innovations. The authors see a retiree surge among the Innovators. Only 10 years ago, 2.2 million people were turning 65 each year. That number has surged to 3.5 million in 2016 and will grow to 4.2 million in 2025. These aging Innovator retirees will completely transform housing, argue Burns and Porter.
Born in the 1970s to dual-income and divorced parents, Balancers are teens who embraced television and video games. Unlike their workaholic parents, Balancers divorce less, stay home with their kids more and have children later in life. One-third of Balancers are foreign born.
Next in the generational grouping are the Sharers. Born in the 1980s, the Sharers invented the sharing economy out of necessity, embracing new technologies. They are the most educated cohort ever, but they are racked by student debt, under-employment, and 20 percent live below the poverty line.
Raised by single parents and born in the 1990s, the Connectors are wirelessly connected 24/7 to friends, family and the knowledge economy. Many Connectors are still in school; they are highly educated, underemployed and wary of credit.
Fascinating, for sure, but what does it mean for the housing industry? A lot actually.
What Does the Future of Housing in America Look Like?
To start, Burns and Porter predict that Americans will migrate south, leaving New York, Pennsylvania and Illinois to the Sunbelt states of Texas and Florida, seeking affordable housing and urban-like environments they call “surban” living. They present evidence of a denser, more urban vision of suburbia that is powered by social and demographic shifts involving working women, affluent immigrants and both younger and older adults.
They also predict a soaring demand for rental units, especially since home ownership rates have declined from 69.2 percent in 2004 to 62.9 percent today. Furthermore, the sharing economy’s de-emphasis on home-ownership will contribute to this trend. It is expected that by 2025, home ownership rates will drop to 60.8 percent, the lowest since the 1950s.
From the impact of immigration to the coming boom in household formation by millennials, Porter’s presentation diagrammed some compelling future demographic trends that will certainly impact our business in the 21st century. Given these changes, high performance builders and contractors will need to rethink their housing initiatives, especially as it relates to their future market segments.