Monday, December 20, 2004
Demographic Trends to Shape Future U.S. Housing Markets
Author: Beth Bresnahan
Publishing date: 12/20/04
By John Handley
Chicago Tribune
RISMEDIA, Dec. 20 – (KRT) – Three powerful demographic forces will shape housing in the future, determining who will buy homes, where they'll buy them and what they will be like.
One demographic expert calls two of the trends the "Browning of America" and the "Graying of America." The third force will be the coming of age of the children of Baby Boomers born between 1977 and 1994 -- or Generation Y.
"Most housing growth will be driven in the future by immigrants and Hispanics," predicted James Johnson, professor at the Kenan-Flagler Business School of the University of North Carolina in Chapel Hill.
This will result in non-white residents rising to almost half of the U.S. population by 2050, Johnson said at a seminar in New York sponsored by the Urban Land Institute, a nonprofit real estate research and education organization.
The graying of America will occur as the 78 million Baby Boomers age out of the labor market, propelling a boom in retirement housing.
Just beginning is the rise of Generation Y. Also called Echo Boomers, this generation of 73 million is turning 21 at a rate of 4 million a year. Gen Y will make up 34 percent of the U.S. population in 2015, Johnson said.
First, though, home construction will get a boost from immigration. Johnson noted that 10 million immigrants will reach their peak home-buying years in the next decade.
The impact has been felt in the Chicago area.
"Immigrants are the major source of population growth in Chicago. Some 45,000 immigrants arrive here each year," said Christopher Shaxted, executive vice president of Lakewood Homes in Hoffman Estates.
"Immigrants have been driving the housing boom here. As high as 40 percent of first-time buyers are immigrants," Shaxted added.
Another Chicago-area builder confirmed the trend. "There's been an uptick in ethnic buyers -- a doubling since a year ago," said Mark Malouf, chief operating officer of Montalbano Homes in Oak Brook.
But buying can be a stretch for some immigrants. "It may take a whole family to buy a house," said Robert Meyn, vice president sales and marketing for the Chicago division of Ryland Homes.
"Ethnic buyers are looking for an extended-family component, maybe a first-floor master for aging parents, with the children upstairs," said John Carroll, president of Kirk Corp. in Streamwood.
Johnson notes that as the U.S. population becomes more diverse, so will housing. "The accordion house is one possibility, especially for Hispanics," he said. "It is an expandable house that can be added onto instead of moving. Also, there is interest in creating a Mexican-style house with more rooms that are smaller in square footage.
"There are real opportunities for builders who understand what's important to ethnic families," Johnson said. "Developers must learn to customize houses to satisfy ethnic and cultural needs. This housing should be near churches and recreation, including soccer fields."
Real estate development hot spots will be in the South and the West, he said.
"The South is emerging as a major destination for immigration, as well as the West. We're in the midst of a massive geographic distribution of foreign-born, especially Hispanics," Johnson said. "Employers are attracting Hispanics to low-cost labor areas. North Carolina has become the new melting pot.
"Banks and real estate firms that target minority customers stand to gain over the next decade. There will be lasting changes in preferences in housing because of the emphasis among Hispanics on the family and the extended family," Johnson said.
Among the many immigrants who have bought new houses in the Chicago area are Jose and Miriam Martinez. Natives of El Salvador, they live with their 1-year-old son, Jason, in a three-bedroom townhouse at Silverstone Lake in Carpentersville.
"I came to this country 12 years ago, and now I'm a U.S. citizen," said Jose Martinez.
He is employed as a machine operator in Hanover Park, while his wife works as a packaging operator in Schaumburg.
"You dream of a house. It's much better to own than rent," said Miriam Martinez.
The Martinez family is typical of Hispanic immigrants who are changing the face of America.
"The U.S. will be the second largest Hispanic nation in the world after Mexico by 2040," J. Walker Smith, president of Yankelovich Partners Inc., told the meeting of the Urban Land Institute.
The changing racial makeup of the United States is reflected in Gen Y.
"Ethnically diverse, Generation Y is 38 percent non-white," said Elizabeth Gillespie, vice president of marketing in Atlanta for Jones Lang LaSalle Americas Inc., a real estate firm. She spoke at an Urban Land seminar.
"Generation Y will change the economic landscape of this country just as their Baby Boomer parents did," Gillespie said.
"Above all, Gen Y is tech-savvy. Their lifestyle is all about technology. They are consumed by entertainment and accomplished at multitasking," Gillespie added.
These techies, already comfortable with online shopping, are sure to use the Internet to research their future residential purchases.
"There are already telltale signs that is happening," said Malouf, the Montalbano COO. "Today's billboards advertising subdivisions don't tell how to get there, but they do give the Web site."
Pamela Hamilton, senior vice president of Centre City Development Corp., the public agency for downtown San Diego's redevelopment, described what Gen Y wants in housing.
"Location is important; they want to be where the action is, like when they were in college. They want to be near coffee shops, clubs and shopping," she said.
"Primarily, they are singles. Units must be affordable. Smaller units of 500 to 900 square feet are OK with them. They like lofts with exposed concrete, high ceilings, open floor plans and bold colors.
"High-speed Internet is essential. Half the buyers will be women, so security is important. Luxury high-rises don't attract this group. That's partly because of price, but also because high-rise condos reinforce privacy, and this group is very social. Also, high-rise design is not what they want," Hamilton said.
Three recent condo buyers in Chicago closely follow these characteristics.
Three friends bought units on the second floor at Van Buren Lofts, the conversion of an industrial building at 1224 W. Van Buren St. on the Near West Side. They are Lisa Ledonne, 24, a nurse at Rush University Medical Center; Erin Duckhorn, 23, a support specialist for an asset management company; and Natalie West, 24, a real estate sales agent.
All now live in the suburbs with their parents until their lofts are ready for occupancy next summer or fall.
"We're all friends and wanted to be together," said Ledonne, who attended Marian Catholic High School in Chicago Heights with West.
Ledonne described how her attitudes differ from those of her Boomer parents. "I'd rather e-mail than call on the phone. I don't watch TV, but my parents do. I'm usually on the Internet."
Duckhorn takes the credit for talking the others into buying at Van Buren Lofts. "I wanted new construction, and the West Loop is a good location. And it's near Greektown."
Her decision to buy has backing at home. "Our parents have seen the boom in real estate and how property values have appreciated," Duckhorn said.
She admits to one typical Gen Y trait -- multitasking. "I put on makeup and do bills while driving. My mother would kill me if she knew."
West acknowledges that most in her age group are renting apartments. "But after a couple of years working, I decided to do the smart thing and buy," she said. "My parents were shocked at the prices. They thought $29,990 just for parking was outrageous."
Most of the one-bedroom-plus-den units at Van Buren Lofts are priced in the $200,000s.
"I wanted to be in the city. I'm not ready for the suburbs," she said.
West added that her generation likes all the best things. "We go for the hardwood floors, the stainless steel appliances, the granite countertops. Maybe we've been spoiled. We've been exposed to nice things and want them.
"My parents have been in the same house for 28 years, but my generation is addicted to change. I'll probably stay in the loft a couple of years and then move," West said.
While members of Generation Y are buying their first homes, some Boomers may be buying their last.
"But it's a mistake to think that Boomers will ever retire," said Smith of Yankelovich. "Two-thirds to 80 percent say they will work in retirement. Work is important to them. The meaning of life comes through work. Boomers are redefining what it means to get old."
While the dream of the Boomers' parents was to retire in the Sun Belt, most Boomers will likely age in place.
In the Chicago area, an increasing number of retirement developments have sprung up.
"There are enough Boomers to support all of Del Webb's communities in the Chicago area," said Karen Brunhofer, Chicago-area president of the division of Pulte Homes. "These are people who want to stay in town because of family and friends, rather than go to Arizona or Florida."
Besides its Sun City in Huntley, Del Webb is opening new retirement complexes in Elgin and Shorewood.
Sharon and Larry Senzel moved in September to Carillon at Heatherstone, an age-restricted development built by Cambridge Homes in far north suburban Beach Park.
"We're retired Baby Boomers," said Sharon Senzel. "We had been thinking about selling our 2,700-square-foot home in Gurnee, and when we came here, we said, 'This is it.'
"It's age-restricted," she continued, "but also diverse because we're surrounded by townhouses and single-family homes of Heatherstone that are not age-restricted."
The Senzels have a daughter living in Hainesville and a son serving with the Marines in Iraq.
Sharon Senzel would agree with the view that Boomers differ from their children: "Generation Y is totally different," she said. "They're more adventurous, not as conservative."
Despite the popularity of age-restricted retirement developments in the Chicago area, one expert believes many Boomers are not sold on the concept.
"Preliminary evidence from focus groups with Boomers suggests that they have a problem with conventional, large-scale retirement communities," said Victor Regnier, professor of architecture and gerontology at the University of Southern California.
"There's the sense that this is my father's retirement community," Regnier said, referring to age-restricted developments. "It's not hip enough for me.
"Boomers want something invented for them. They think the sun rises and sets over their generation."
Generation Y would probably disagree.
© 2004, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News
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