May 20 2005
Households headed by Generation X-ers and members of the so-called “echo-boom” purchased 55 percent of all newly built homes sold in 2003 and are fast becoming the trendsetters in U.S. housing markets, according to Census reports and newly analyzed buyer preferences data from the National Association of Home Builders (NAHB).
“A new generation is viewing the housing market from an entirely different perspective than the baby boomers who’ve traditionally dominated industry trends,” said NAHB Executive Vice President and CEO Jerry Howard. “They’re techno-savvy and are more likely to be house-shopping on the Internet. They have a strong awareness of all their options.”
Gen-Xers in particular are wielding their buying power to shape today’s new-home characteristics and market trends.
“They and younger buyers were responsible for more than half of all new-home purchases in 2003, and are twice as likely to purchase new homes in the immediate future as baby boomers and seniors,” Howard said.
American Housing Survey (AHS) data from the U.S. Commerce Department shows that, while households headed by those aged 27-40 (the “Gen-X” generation) accounted for 28 percent of all U.S. households in 2003, they were responsible for fully 49 percent of new-home purchases that year. Another 6 percent of newly built homes were purchased by echo-boomers (born after 1979), 33 percent were purchased by baby boomers and 12 percent were purchased by seniors aged 60 and up. Meanwhile, NAHB research on consumer preferences indicates that 37 percent of Gen-Xers and 27 percent of echo boomers intend to buy homes in the next two years, compared to just 13 percent of baby boomers and 6 percent of seniors.
What does this mean for the next generation of home building?
“Previously there was speculation that younger buyers would be more thrifty than their parents with respect to their housing choices, but our research shows just the opposite is true,” said NAHB Director of Research Gopal Ahluwalia. In fact, many overwhelmingly favored options support the idea of a “move-up mentality” for younger buyers.
For example, both echo boomers and Gen-Xers say they would like to have a home that is about 50 percent larger than their current residence. This compares to seniors and baby boomers, who want only 17 percent and 22 percent more space, respectively. Similarly, 91 percent of echo-boomers say they would like their next home purchase to be a single-family detached home, versus the 46 percent who currently live in that kind of house. Seniors, on the other hand, are more likely than any other group to want to buy a townhouse rather than a single-family home – though most still prefer the detached option. Other housing preferences of younger buyers also show the inclination for a more luxurious lifestyle.
For example, 61 percent of echo-boomers and 67 percent of Gen-Xers say they would prefer to have four or more bedrooms in their next house, compared to 40 percent of baby boomers and 26 percent of seniors. Similarly, younger buyers show a much greater preference for high ceilings that lend a greater sense of volume and spaciousness to a home. Fully 73 percent and 77 percent of echo-boomers and Gen-Xers, respectively, say they want nine-foot or higher ceilings on the first floor, compared to 65 percent of baby boomers and just 54 percent of seniors. In terms of high-tech amenities, echo-boomers are more likely than any others to want a home theater, automated lighting controls and a built-in security system.
“In all, we find that the preferences of younger buyers tend toward greater space and more sophisticated amenities than those of their forebears,” said Howard. “Incorporating these preferences in homes that new buyers can afford will be our industry’s challenge going forward, just as tracking these evolving trends will be an ongoing challenge for NAHB.”