As homebuilders focus on the demographic shift presented by retiring baby boomers, another shift is also taking place in the rise of the millennial generation. While many baby boomers are retiring to greener pastures, millennials represent an even larger segment of the population that real estate developers can target. According to Goldman Sachs, while around 77 million individuals make up the baby boomer generation, 92 million people were born into the millennial generation. Many myths permeate the housing market regarding this generation, including their desire to refrain from moving to suburbs or master planned communities. While some of the members of this generation seemingly send contradictory messages to homebuilders and real estate developers, master planned communities have several aspects that can attract this bustling segment of first-time homebuyers.
Obstacles to homeownership
Homebuilders need to understand what is stopping millennials from entering the housing market. Many of these individuals entered the job market during the height of the 2008-2009 financial crisis. This experience led many to focus more on ensuring they have enough capital saved to afford paying down a mortgage. In addition, some individuals became disillusioned with homeownership due to the bad press of subprime mortgage and bundled mortgage securities.
Goldman Sachs noted that while this generation seems reluctant to enter the housing market, the sheer number of people and their eventual desire to settle down and raise a family will no doubt compel many to seek out housing, eventually leading to a surge in home sales. By understanding what motivates this segment of the population, real estate developers have the potential to build housing in master planned communities that fits the needs of this generation.
Dispelling the fallacies
Although many millennials want the freedom that accompanies renting an apartment, where they are not tied down to a mortgage and are free to travel and pursue adventures, this is not necessarily an overwhelming prerequisite for the generation. Similarly, while many millennials prefer urban dwelling that provides the mass transit, cultural amenities and rental options typically not found in the suburbs, only 13 percent of millennials actually live in or near downtown centers, Urban Land Institute reported. Despite popular assumptions, 63 percent of this generation lives in suburbs or other city neighborhoods. Roughly half of these individuals currently rent, with 18 percent sharing housing with roommates. Perhaps most promising of all for homebuilders is that nearly every millennial surveyed expected to eventually own a house.
M. Leanne Lachman, of Lachman Associates, helped puncture the myth of millennials primarily living in dense urban centers and preferring to rent apartments. Additionally, Lachman noted the resilience and determination of the demographic cohort.
"Millennials are an intriguing combination of optimism and realism," said Lachman. "They have high hopes for themselves in the long term, despite having to temper their short-term expectations. Once real adulthood sets in at about 30 - which is the new 20 - they have a lot of catching up to do, which can be stressful; yet 72 percent report that they are happy, and 74 percent are hopeful."
According to another Urban Land Institute article, Chuck Perry, the principal of Perry Rose, a division of the Jonathan Rose Companies, is also optimistic about the role millennials will play in the future of the housing market.
"People make different choices at different times in their lives," said Perry. "[When the millennials living in urban apartments begin to have families] we'll see a shift, with some of them leaving the cities for the suburban homes" their parents are vacating.
While many urban centers have a disproportionately high price of real estate as compared to the average income for millennials, some cities, such as Austin, Texas, have ideal income-to-mortgage ratios. Using data from the U.S. Census Bureau, Zillow Group Inc. and Bankrate.com, BloombergBusiness calculated what kind of annual income level the typical millennial would need to earn to afford a home in the largest U.S. cities. While cities like San Jose, Denver and Seattle remained out of reach for the majority of millennials, Texas hubs like Austin and San Antonio fall firmly within the realm of affordability. Bustling cities like Austin and San Antonio, which are home to several booming master planned communities like Vintage Oaks, make the perfect choice for millennials.
Millennials are focused on personal wellness, which includes exercising, yoga, and other forms of physical well-being.
Compared to previous generations, millennials are exercising more, eating smarter and using apps and wearables to measure dieting and exercising habits. Having access to congestion-free green spaces and outdoor places to exercise and swim are primary drivers of where millennials will choose to live. With master planned communities offering these amenities, they make the perfect choice for millennials.
One of the best options to attract millennials that real estate developers have at their disposal is the ability to build homes that adhere to sustainability standards. Millennials, much more so than previous generations, are extremely conscious of their carbon footprint and the ecological impact of their actions. By purchasing land in Texas and building their own homes, millennials can ensure their homes are green.
Outdoor amenities at master planned communities can entice millennials