The millennial generation is shaking up the future of the housing market.
When considering the future, it’s easy to get excited about the technological innovations, smart objects and how the internet of things will change the way we live. But in order to prepare for the most plausible scenarios, we also need to recognize the political, economic and societal shifts that are affecting the residential industry today.
A Tale of Two Cities
Many cities find themselves telling dual narratives: the economy is strong, but civilians are struggling to afford their lifestyles. Overall, home values are on the upswing. What’s spurring the upward momentum? Generally, low inventory and residual recession-era lending practices.
Low mortgage rates artificially keep the market affordable, but affordability will become a challenge in the coming years because wage growth and inflation are lagging significantly behind. CoreLogic, an information analysis firm, recently determined that the rocketing home values in Denver, Houston, Miami, San Francisco, New York and Washington, D.C.—key hubs for the millennial urbanite—simply cannot be sustained. Paradoxically, low-income earners in these cities have greater access to stable housing than middle-income earners who can’t claim housing subsidies.
The New Shopper
Millennials do share the aspiration of homeownership, but they have had to delay that investment until later in life.
Societally, the housing industry (and many others) are still figuring out how to deal with the newest generation with spending power: millennials. Also called Generation Y, this group came of age post-9/11, and its members are now entering their prime earning years. Many headlines proclaim that millennials are less inclined to homeownership than any previous generation. The popularity of sharing services like Uber, Airbnb and WeWork suggests a desire for freedom as well. A deeper analysis reveals that millennials, who started adulthood during one of the worst economic times in living memory, have unprecedented amounts of debt. Understandably, these factors have discouraged them from saving money and making big purchases like cars or homes. Young people do share the American aspiration of homeownership, but they have had to delay that investment until later in life.
Millennials, who at this point were expected to be well established on the property ladder and trading up from their starter homes, are instead still saving for their first down payment.
Developer startup Pocket Living takes a creative approach to this problem. Based in London, Pocket Living is dedicated to turning middle-income earners into first-time homeowners. It develops buildings in up-and-coming neighborhoods into contemporary, compact apartments and sells them at least 20% below market value, enabling otherwise priced-out young professionals to afford them.
An alternate scenario could see the housing industry itself begin to successfully decode these driving forces and spearhead the movement to creatively adapt in this sector. Looking at your own work, how can you position yourself ahead of that curve to prepare for the shifting landscape and consumer needs of tomorrow?
This article appears as it was originally published on hiveforhousing.com.
Want to start a deeper conversation about trends and foresight in housing and urban planning? Reach out to Bryan at firstname.lastname@example.org.
Bryan Goodpaster is Senior Creative Director of Trends & Foresight at LPK, where he is often called upon for his non-traditional approach and strategic consultancy—helping crack wicked brand problems and strategic conundrums for many category-leading brands. Unbound by methodologies and traditional design thinking, Bryan’s deep consumer empathy drives him to be as creative in his approach and process as in his outputs.