The influencers in your market are gradually changing, and those changes could have a significant effect on your business over the next 10 years.
According to a newly released report by the Urban Land Institute and Johns Burns Real Estate Consulting, the U.S. is expected to add 12.5 million net new households over the next decade (from 2016 to 2025) — nearly double the 7 million formed in the previous 10 years. That means a flood of new potential clients is on their way — and they are predicted to transform both residential and commercial markets.
The report, Demographic Strategies for Real Estate, highlights how four demographic groups in particular will be key players in the housing market into 2025: women, immigrants, retirees, and young adults.
Minneapolis-based broker Julia Israel already sees the transformation in her market. Her office is located in the Uptown neighborhood, a trendy area in the city with high-priced rentals that millennials have been flocking to in recent years. The area has grown more diverse, too.
Some brokerages and REALTOR® associations are offering seminars and continuing education credit to help real estate professionals prepare to meet the changing demographics. Israel, the diversity committee chair at the Minneapolis Area Association of REALTORS®, moderated a panel on Oct. 20 for local agents about “Navigating Diverse Markets.” The discussion highlighted the cultural differences among the areas’ African American, East African, Latino, Southeast Asian, American Indian, and lesbian, gay, bisexual, and transgender communities. Israel has held workshops at her brokerage, Keller Williams Realty Integrity Lakes, where she serves as a productivity coach and trainer. She has also taught designation courses for the National Association of REALTORS® on how real estate professionals need to be prepared to serve a culturally diverse clientele, first-time buyers, and retirees.
“The demographics are changing dramatically everywhere,” says Israel. “If you don’t pay attention, your pool of clients is going to dwindle.”
These four groups are expected to drive the next decade’s real estate markets, and these tips will help you help your agents prepare for them.
Women’s buying power is strengthening as their workforce numbers rise sharply. Women now earn 58 percent of all college degrees nationwide. They earn more than their spouses 38 percent of the time. By 2025, the number of women in the workforce is expected to jump to 78 million — 8 million higher than the level in 2015.
The working woman today is different than previous generations. Forty years ago, 68 percent of women in their late 20s had both a husband and child. Today, that percentage has plunged to just 22 percent. Women may delay marriage or child-rearing to focus on their jobs first. But single women have shown they’re not afraid to step into home ownership alone. Single women accounted for 15 percent of all home purchases in 2015, while single men made up 9 percent, according to the National Association of REALTORS®’ 2015 Profile of Homebuyers and Sellers.
Community impact: Women are expected to have a larger influence on the commercial office market. Female executives likely will have more of a say in office space selection, given their increasing dominance in the workforce, the report notes. They’ll likely favor shared space and e-commuting because of the financial savings and increased flexibility. Therefore, commercial markets may see fewer square feet per employees as “companies transition to a hotel-like atmosphere where people ‘rent’ a desk for the day,” the report says.
Get your brokerage ready:
- Build a network: Find female-centered groups to add to your network. Join the Chamber of Commerce to connect with working women or groups like the Network of Executive Women or the Women’s Executive Club. If there’s not a chapter in your area, consider starting one.
- Corner the condo market: Get familiar with your condo market. A report by Harvard University’s Joint Center for Housing Studies showed that single female buyers are more likely to purchase condos than single male buyers or married couples. They also tend to prefer two-bedroom homes more than other buyers and are less likely to choose newer construction than married couples, according to the study, “Buying for Themselves: An Analysis of Unmarried Female Home Buyers.”
- Offer financing resources: Women going it alone in real estate may face a tougher time qualifying for a mortgage than a married couple. Further, women tend to pay higher mortgage rates than men, according to a separate study by ULI earlier this year. ULI speculated that’s because women tend to comprise a higher percentage of subprime loan borrowers and their credit profiles tend to be less favorable than men’s. The financial aspects of purchasing may prove to be your single female clients’ biggest hurdle. As such, be ready to provide low down payment and mortgage resources when needed.
Immigrants are expected to comprise more than half the U.S. population growth by 2023, if current trends continue. In 10 years, more than one of every seven residents will be an immigrant. Many of the immigrants coming to the U.S. are highly educated middle- and upper-class families with substantial buying power, the ULI report notes. “These consumers are vital to the economy, but common wisdom about the ways they form households, buy homes, and behave in the marketplace no longer holds,” according to the report. “Immigration has shifted from impoverished refugees walking across the border or landing via boat to affluent middle- and upper-class families fleeing their native lands after decades of amazing economic growth.”
Community impact: Households may get bigger. Multigenerational family living is defined as households that include two or more adult generations. Asian and Hispanic populations are more likely to live in multigenerational family households than other ethnicies. And as their numbers have increased in the housing market, so has the number of these households. Multigenerational households soared to a record 60.6 million, or 19 percent of the U.S. population, in 2014, according to an analysis this year by the Pew Research Center. As more people live under one roof, there may be an increase in demand for homes with two master bedrooms, separate entrances, garage conversions, or even separate outdoor spaces.
What your brokerage can do:
- Evaluate your demographics: Take a look at your market’s own demographics make up. What does diversity look like in your area? How is it changing? How can you reach those in diverse areas? Consider adding a bilingual interpreter for a lender in your network or translating your marketing materials into Spanish, depending on the changing demographics in your community, Israel suggests.
- Learn the culture: There may be some cultural differences in how you reach out to groups of buyers, from the communication styles to housing preferences. For example, in serving Chinese buyers, the ancient design philosophy of feng shui may be a powerful influencer, according to a 2015 study by Better Homes and Gardens Real Estate and the Asian Real Estate Association of America. In that survey of 500 Chinese-American buyers, 86 percent said feng shui played a role in a future homebuying decision, and 79 percent said they’d pay more for a home with feng shui principles.
- Network with insiders: Israel recommends partnering up with others who are already working with immigrants in your area to expand your outreach. Or, look to start your own group. Israel is the cofounder of the Umoja Community Development Corp., a nonprofit organization that helps people with diverse incomes and backgrounds achieve home ownership.
Baby boomers aren’t softening their buying power into their golden years. But they’re very diverse in how they’re exercising it in retirement. By 2025, 66 million Americans will be over the age of 65. That is 38 percent more than in 2015. Young retirees’ needs and lifestyles are varied, which can create a variety of customer segmentations within this group. For example, 19 percent of 65- to 69-year-olds still work full time. Those born in the 1950s are still maintaining active lifestyles and are spending their unprecedented net worth, often on real estate.
Community impact: Retirees may help foster more mixed-use developments. A report released by the Brookings Institution found that walkable, mixed-use developments could even help reduce the effects of disabilities many retirees face as they age. More developers are looking at retirement buildings that are dense, urban, and centered near retail sites and services. Also, the rise of the sharing economy and short-term rental sites may also pave more ways for retirees on fixed-incomes to profit off their real estate. For example, sites like Craigslist and Airbnb are making it easier to rent out rooms. That said, “renting empty rooms could steal demand from hotels, apartments, homebuilders, and local municipalities who rely on hotel taxes and development fees,” the ULI report warns.
What your brokerage can do:
- Earn a designation: Encourage your real estate professionals to get specialized training to learn more about the senior population of home buyers and sellers and how to better serve them. NAR offers the SRES designation for Seniors Real Estate Specialists. The designation focuses on preparing agents to better counsel clients 50 and over through relocating, refinancing, or selling the family home. Plus, you can tout the designation in your marketing as an expert in helping seniors.
- Target cohorts of retirees: Due to the diverse needs of retirees, the ULI report says that segmentation of reaching this population is key. For example, some of your real estate professionals may target the 1950s “Innovators” (more entrepreneurial people who have active lifestyles and are spending at high rates the net worth they’ve accrued over the years), while others may corner the 1940s “Achievers” (the 19 percent of 65- to 69-year-olds who still work full time and continue to achieve financially today), and still others may prefer to work with the 1930s “Savers” (shaped by frugality in childhood and a longer than expected lifespan, they are searching for ways to make their money stretch). Each cohort has different housing needs, whether downsizing or upsizing. “We have a special task in working with seniors in the transition, whether it’s helping them to downsize or even transition into an assisted living facility,” Israel says. “This is another untapped target market that isn’t being focused on nearly enough. There are so many issues with getting them to move from their homes and transitioning to different living experiences.”
4. Young Adults
The millennials are expected to drive the majority of new household growth over the next decade, although more slowly than their predecessors at forming new households. They’ve delayed getting married and starting families. Also, high rents, student debt, and the Great Recession have been blamed for curtailing their leap into home ownership. But they are coming. The 44 million 18- to 27-year-olds born in the 1990s will lead the majority of new household growth over the next decade, ULI predicts. They are expected to create 14 million households by 2025.
Community impact: Prepare for a newly labeled type of housing to enter your community: The surban. It’s a term coined by John Burns Real Estate Consulting to describe the combination of urban in-demand traits (such as public transportation and proximity to employment) with suburban living (including quality schools, privacy, and larger home sizes). “Surban” developments are expected to rapidly grow, transforming shopping centers into areas that combine housing and retail that offer walkable, convenience, and car-free living. Municipal leaders gradually are responding with zoning changes to permit more of these developments. The report also notes another community impact from the growing millennial population is an uptick in rental housing, townhomes, and smaller homes with small to no yards.
What your brokerage can do:
- Learn more about them: Encourage your real estate professionals to learn more about this growing group known for their tech-savvy ways. Several real estate designations offer continuing education with courses about marketing to millennials and how they differ from other generations. As an instructor for NAR’s GRI designation (Graduate, REALTOR® Institute), Israel teaches a course about resources for first-time home buyers and how to market to the millennial buyer. REBAC, the Real Estate Buyer’s Agent Council, also offers a “Generation Buy” course, which examines the communication preferences of the four main homebuying generations and specific marketing tools to reach them.
- Offer financial resources: Many surveys on millennials show a high desire to buy but say financial barriers are preventing them from doing so. As such, your marketing message may need to be financially centered first. A recent survey by NeighborWorks America suggests that greater awareness of down payment assistance programs and student loan debt counseling may help more millennials venture into home ownership. The study found that 71 percent of young professionals recently surveyed said they were unaware or not sure about down payment assistance programs. What’s more, 77 percent respondents with student debt said they had never heard of or were not familiar with student loan counseling programs from nonprofits.
- Justify your purpose: “Millennial buyers have so many resources at their fingertips,” Israel says. “They are very knowledgeable when it comes to the housing market because everything is so available electronically nowadays. But while they may have access to so much information, they still need to be educated on what all it means.” Approach them delicately, however, as Israel counsels real estate professionals in her coaching. As millennials share the information they have learned, don’t blurt out how wrong it is. Instead say, “I understand what you’re saying. I know where you got that information from,” Israel says. They want to be heard. But you also have to set them straight, so then segue into a talk about whether the information is true or puts it into context. Use that talk to justify why they need you in their corner helping to use that information to find or sell a home.