How the Birth of Suburbia Killed the Millennial Home Buyer
At the mention of “The American Home,” most people envision a similar image. It likely resembles any child’s drawing of a home; a cozy, traditional style home for 4.5 people, a single door in the middle, a window to each side, wood siding or stucco finish, and a pitched roof. However, you would likely be surprised at the results of a web image search of “The American Home.”
Top results show more contemporary designs; including open plans, connection to the outdoors, clean lines, and materials of stone, glass, and metal. Moreover, DIY network TV shows now highlight small spaces and ways to efficiently live in them. Times have changed, and with them, the desired style and structure of homes. What was once known and accepted as a home no longer applies to the world we live in, or the way we carry out our lives today. The home building industry is reluctant to break from the format that has “worked” for the last 70 years. Consequently, a concerning gap in the home buying market continues to grow as Generation Y has more hesitation and less need to commit to buying a home.
How Did We Get Here?
Prior to the 1950s homes were often multi-generational, granted from parent to child. They were typically built with quality construction methods, intended to withstand the test of time. Over the last 70 years, urban sprawl has greatly changed the course of housing, creating a marketable and lucrative housing industry. Urban sprawl is the process of population migration where those with typically higher incomes move from urban centers to vacant, more desirable suburbs. Before the growth of the suburb, homes were approximately 900 square feet in size.
Suburban expansion provided an abundance of land to buyers, as compared to urban centers. Americans were conditioned to aspire for the ‘McMansion’ ranging from 2,000–3,000 square feet, in an attempt to keep up with their neighbor. The demand inevitably drove land prices up. To adjust for profit margins, land was subdivided into smaller and smaller lots to accommodate growth and increase income for developers and cities. However, homes remained the same size in order to appease the newly cultivated home buyer expectations. Density increased until homes were just 8–10 feet apart. Construction methods were modified to cut costs and meet accelerated schedules. Quality often suffered due to many factors, including, but not limited to, construction pace and labor experience level; however, the product remained marketable for some time. For developers to take on the financial risk of land and construction costs, the payoff had to be substantial. It was efficient and risk averse to continue building boilerplate homes using the same methods and processes, and take advantage of the demand while it was there.
Inevitably, the demand dissipates and the market bubble bursts from lack of buyers and too many undesirable and financially unattainable homes. Unfortunately, the process is doomed to repeat itself due to the industry’s learning curve and the financial stakes involved in home construction. Such market collapses chiseled the building industry into a painfully conservative, lemming-like group, left to shun significant innovation. The hardwired system of a cyclical copycat industry was born.
What Is The Problem?
For previous generations, homeownership was an ultimate goal, a sign of success, and proof of one’s growth and development as a contributing member to society. While the sentiment still exists today, it has lost its luster with Generation Y. Homes are still seen as long-term investments, however the risk, short lived quality, and commitment associated with homeownership is a greater deterrent. Near perfect circumstances are now required in order for our cohort to overlook the risks and move forward with purchasing a home. As a generation with more diverse interests, lifestyles, and goals, there are an exorbitant number of considerations that affect our decisions relating to homeownership, including, but certainly not limited to, initial and ongoing costs, school loan debt, lifestyle sacrifices required to purchase and maintain a home, proximity to family and friends, proximity to and relationships with neighbors, whether to reside in the city versus the suburbs, architectural style, square footage, required maintenance, proximity to work, and job loss or change, to name a few. The homes of today neglect to appropriately address the concerns of Generation Y.
Our generation is more of a moving target than previous generations have been. Contrary to what many surveys suggest, our generation is not as clearly defined as those previous to us. There are significant variations in preference. Yet there are two common traits in our generation: 1) we seek value, whether emotional or financial; and 2) the majority, if not all, of this generation has been raised with technology and a connectedness through the internet. Technology has brought every corner of the world to our fingertips. This Back to the Future generation has high expectations for innovation. We are exposed to much more than previous generations, and we want it all now, or at least the ability to foresee obtaining it. The same holds true for our homes. Our homes must provide it all: quality construction and materials, minimal maintenance, environmental consideration and connection, controlled connection to family and friends, and above all, financial attainability and flexibility.
The National Association of Realtors’ 2015 Study on Generational Trends suggests that the majority of our age group expects to live in a purchased home for six years or more. However, any home which someone our age may be able to afford now will likely not align with their lifestyle in the near or distant future.
Where Do We Go From Here?
In order to close the gap in the buying market, turnkey quality starter homes must first be introduced to the market. Additionally, the industry must progress and pursue innovative concepts. For instance, imagine a home that has the ability to grow and condense as needed throughout the milestones of one’s life. For example, Graco, a baby products manufacturer, has developed a 3-in-1 multi-use car seat that seamlessly transitions from a typical harness booster for infants, to a high back belt positioning booster for younger toddlers, to a backless belt positioning booster for older toddlers. The ability to adjust your home as needed provides an opportunity to negotiate better insurance and property tax rates both as a young homeowner and an empty nest senior. The incorporation of flexibility into the structure, as well as the interior systems of a home are paramount. The LifeEdited movement is a community, motivated by the creation of the “LifeEdited apartment,” where 1,000 square feet of functionality is utilized within only 420 square feet. The group abides by the motto of “design your life to include more money, health and happiness with less stuff, space and energy.” In turn, this concept has spawned the “tiny house” movement where homes at 600 square feet are popping up all over the country. By applying smart concepts and technology such as built-in and portable furniture, moving wall systems, and multi-functioning products, homes can utilize a design that allow users to financially and environmentally live within their means.
IKEA, the popular furniture retail giant, has taken notice to these movements and is in the process of developing its own moving wall systems for comfortable small apartment living. Even concepts of the recent past are appropriate to advance development home design for millennials. The Case Study Homes of the 1940s-60s aimed for efficient construction and design, flexibility, and connection to the environment through open plan modular design and prefabricated construction.
While prefabricated construction in its purest form is not yet feasible for mass development, there is recognized merit in the concept. With a hybrid system, where a home is designed on a modular grid and incorporates prefabricated components such as structural insulated panel systems (SIPS), interior wall and stair systems, and kitchen and bath components, one begins to take note of the various trade-off opportunities in efficient manpower and construction timing. Affordability is greatly impacted by land holding costs for developers; shorter construction time can significantly affect affordability by reducing the time required for developers to hold the land, potentially passing on cost savings to home buyers.
In addition to the above, the size of a home has an effect on its timing and affordability. According to the National Association of Realtors’ 2015 Study on Generational Trends, the majority of homes purchased by Generation Y were 1,000–2,500 square feet, with 31% of those homes being 1,500–2,000 square feet. The larger homes identified are likely to have been purchased by those with families or those planning to have families in the near future. However, it has been acknowledged that our overall generation is marrying and starting families over six years later in life, as compared to 50 years ago. Those of us who do not purchase homes tend to either live at home with parents, share a space with friends, or rent apartments which typically range from 700–1200 square feet. Considering our generation’s active and fluid lifestyles and ability to manage in smaller apartments or shared spaces, it is clear that there is less immediate need for space. In addition, many appliances and luxury items such as phones, music players, computers, and televisions have reduced in size or have otherwise been rendered obsolete, which suggests that, if designed efficiently, there is a potential to reduce base home square footage for added cost savings. However, as previously stated, value is critical. For such propositions to be feasible, the designs and structural systems at play must be conducive to planned floor plan expansion or contraction as needed throughout home ownership. With this in mind, it can be said that in today’s economy, there exists ample opportunity to provide true “starter homes” which are more attainable in their base state.
In sum, Generation Y is a diverse group, and homes should reflect as such, adapting to the broad range of interests, lifestyle changes, and variations. The industry can no longer accept the status quo of home building for the sake of being safe and risk averse. Instead, builders, designers, governmental officials, and consumers must rid themselves of the blueprints of the past, elevate beyond the stigmas that dampen concepts like prefabricated construction, and encourage and embrace innovation. Providing a new product type will assist in closing the growing gap in the housing market, and facilitate a healthy track for growth in homeownership. If we continue down the same beaten road, we are doomed to experience the same housing market cycles every few years. Fortunately, inspiring discussions relating to housing as it applies to Generation Y have recently gained much notoriety. The future is bright. An opportunity has been presented where we can fundamentally change and impact housing for the better, and we can and should do so by initiating new systems which will promote a healthy and stable housing market that not only closes the gap between baby boomers, Generation X, and Generation Y, but will continue to close the gap between future generations to come.
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