For all things millennial, who better to ask for commentary than someone who spent three years and 9,000 hours researching the ephemeral millennial?
Culminating in a book called Big Shifts Ahead (BigShiftsAhead.com), John Burns gives us a rundown on what insight all this research has garnered and how industry executives might adjust their game plan accordingly.
To start off, tell us a little about the book.
JB: In 2013, the economy was recovering but the housing market wasn’t really coming back like we thought it would or should. There was one millennial anecdote after another that people threw out as excuses. So, Chris Porter, our chief demographer, decided on a research project to figure out what was going on with the demographics, particularly related around the millennials. So, that’s the book we published, designed to simplify the discussion to help executives make decisions…
What are the major take-aways?
JB: There are two main game changers in there (or at least that’s what people who’ve read it have told me). One, we redefined the generations by the decade people were born instead of the millennial, gen-X, boomers, etc… so that everyone is operating on the same time frame…I think that’s helped provide a lot of clarity.
Two, we built a framework to discuss all of the trends that people are talking about. The framework is built around four main disruptors, or influencers: government policy, the economy, new technologies, and societal shifts. Everything that we discuss falls into one of those four buckets. We did a whole history of those born in the 1930s all the way up until now and how those four influencers have impacted their lives that’s providing a great framework now as people are looking at what impact new government mortgage policy or new immigration policy will have…
Then who is this millennial making up 40 percent of the buying market right now?
JB: The entry-level buyer born in the 1980s is the millennial group making up that 40 percent. They’ve already formed 20 of their 24 million households, so that’s not the millennial that’s still living with mom and dad – they’re out. But when they form a household, that’s usually a rental household (although more than usual are coming out straight into home ownership – they saved a down payment living with mom and dad). The fact that they tend to be buying in their early 30s rather than late 20s, and that they tend to be dual-income, college-educated couples, actually gives them more affluence than most entry level buyers, even though that’s contrary to what you’ll read in the paper because they have been born into a crappy economy. If you talk to our homebuilding clients, that’s their entry-level buyer: somebody who makes $120k a year because they both are college-educated and each make $60k a year. They can afford a $500k home or maybe even more than that
What do you think people should be building to attract that type of buyer?
JB: It’s very location specific. What I’ve shared so far has been most of the positive stuff. Only 38 percent of people are getting college degrees, the majority are not, so there’s still quite a demand for affordable first time buying. But because of the cost of land and the cost of materials, our industry is having a hard time going that direction. However, I’ve seen a lot of our clients have success, like in the outskirts of Texas. That’s where that category of person is buying a new home, for the most part. Otherwise, they’re in the resale market. It’s more affordable for them.
BD: What can production builders do to attract that kind of first time buyer out of the resale market, location aside, even if it means going a bit above their budget?
JB: People love the latest and greatest, especially millennials. So, new homes that are more energy efficient, that have the latest technologies… I think people want that, it’s just that for the majority of people, how much of a premium are they going to pay for that versus a resale home. I think our industry is asking for a much larger than usual premium for a new home today. Which is one reason new home sales are slow. But I also think the industry has to, otherwise there’s no profit margin. It’s costs that have forced them to do that.
Do you see that affected more by materials cost or regulatory costs?
JB: It’s definitely labor and local regulations.
If amenities like the ones mentioned could be provided at a cost closer to resale, do you think it would sway buyers?
JB: I think it would sway the majority… This whole experience economy is evidence of people really valuing their time and what they’re doing, so, as a generation, they’re less likely to commute to have a nicer house. They’d rather have a less nice house and be closer in, and that’s often a resale. Town homes are much more acceptable with this group, smaller yards and all. One of the terms that we came up with that’s getting a lot of traction, especially thanks to ULI, is “Surban”, which is bringing the best of urban to the suburbs. There are a lot of smaller cities saying, “We want some of this high-density housing that’s walkable to our downtown.” ULI had us do a synopsis of the book for them which they’ve circulated to their members and people are starting to use the term Surban, which I think sounds so much better than mixed-use.