When the housing market collapsed 10 years ago, conventional wisdom held that millennials would become a lost generation — a generation that would persue settling down due to the trials experienced by their parents during the recession of 2008 in Fargo. They became more risk-averse, afraid to meet the same fate of previous generations.
Millennials And Gen Xers
While demographic and lifestyle choices, as well as a desire for nonconformity, have contributed to the high rates of renting over owning among millennials, one of the main factors pricing millennials out of homebuying is, ironically, high rents.
While baby boomers and Gen Xers saw homeownership as an opportunity to build wealth and as a place to settle down, millennials do not. Millennials are often unable to forgo renting in favor of homeownership, in part because of the high cost of living in the cities they choose to live, as well as the high debt load they carry following graduation. This is potentially problematic for the financial future of their generation, as homeownership historically has been a tool for wealth-building in the United States.
Another millennial preference has been to leave the suburban and rural life, which has pushed demand for more urban-friendly apartments over private homes.
Changes Are Coming
Although so much time and effort have been spent on understanding the millennial generation and their homebuying preferences, the market is on the cusp of yet another shift in homebuying trends as Generation Z prepares to enter the market and make their own mark.
If history is prologue, Gen Z seems more interested in suburban living as opposed to life in the big city. Gen Z renters are willing to sacrifice location for space, amenities, value, connectivity and community.
Coming of age in the shadow of the Great Recession, Gen Z is more financially conservative but remain optimistic. Gen Z has been entering the housing market as renters with their sights set on homeownership; an estimated 101,000 have already purchased homes.
An Chanvce For Workforce Housing
Despite having aspirations for homeownership, we do not have enough data to know where Gen Z will end up as far as homeownership is concerned, and with rising interest rates it is unclear whether their optimism will lead to substantial changes in the marketplace.
With that uncertainty, there is plenty of opportunity now in workforce housing. There is a niche that has formed for suburban property owners who have been enticing these younger buyers who prefer suburban living but also want access to public transportation and desirable amenities at an affordable price. Our firm, for example, incorporates community into our properties, offering a variety of events and programs, including speed dating, game nights and sports leagues, in addition to some of the other luxuries many have become accustomed to, from swimming pools to gyms and playrooms for children.
It is important for property owners within the workforce housing space to familiarize themselves with their residents. Rather than assuming that what worked for one community will work for another, widen your outreach program to include roundtable discussions or focus groups that garner direct feedback from your residents. Determine what is important to them and renovate or update your properties accordingly. There is no rule of thumb for what makes a workforce housing property successful. Instead, take the time to understand the needs of your residents and what improvements will heighten their sense of community.
Responding to consumer demand is necessary to keep up with the market, but it’s important to know who is driving that demand and to recognize when the market and buying power is beginning to shift. For now, millennials remain in the driver’s seat, as they are currently the largest market and the right age to buy and rent homes. However, in a few years, Gen Z will take over and become the drivers within the market, changing the way developers and owners approach their properties. Make sure you’re ready, because it’s coming.
