Gen Y’s homeownership dreams are incredibly strong. Within five years, two-thirds of all survey respondents expect to own their residences, including over half the people who will still be in their 20s in 2015.
In 2010, generation Y surpassed the baby boomers to become America’s largest generation. Over the next 20 years, this 77.4 million–member group will continue to grow as immigrant counterparts arrive in the United States. Gen-Yers are currently 15 to 32 years old, are moving into apartments and buying homes, and will dominate residential demand for much of their lives—similar to the boomers’ impact over the last 45 years. Today’s young adults are not getting the attention they deserve, especially in light of the fact that they account for 25 percent of America’s population.
| Gen Y Descriptors
To get a handle on this young generation’s housing circumstances and future preferences, ULI commissioned an online survey of a national sample of gen Y members who are finished with high school: 18- to 32-year-olds. Conducted last summer, the survey is representative by age cohort, ethnicity, and region of the country. It captures the opinions of a good mix of working people as well as those attending vocational schools and universities. Among the 1,241 respondents, 36 percent are 18 to 24 years old and 64 percent are 25 to 32.
Over one-fourth of surveyed gen-Yers still rely on their parents or their colleges for housing. Among 18- to 24-year-olds, a remarkable 29 percent are still living at home—but so are 14 percent of the 25- to 32-year-olds. This is why psychologists use the phrase “emerging adulthood” to characterize gen-Yers as they move through their 20s and enter their 30s. (Nowadays, parents often contend that age 30 is what 20 used to be.)
We were surprised to find that 35 percent of respondents currently own their homes. If one eliminates those who are living with relatives, at universities, or in mobile homes, 49 percent of the remaining gen-Yers own their residences—far higher than was expected. Apparently, young adults took full advantage of the first-time homebuyer tax credit in 2009 and 2010. Generally, it is the older gen-Yers who have bought homes and condominiums; however, 15 percent of respondents who are not yet 25 years old also own their dwellings.
Gen-Y’s homeownership dreams are incredibly strong. Within five years, two-thirds of all respondents expect to own their residences, including over half those who will still be in their 20s in 2015. Almost 80 percent of those who will be in their mid-30s anticipate owning. (Even among survey respondents currently living with their parents, over half expect to have acquired their own homes within five years; perhaps staying with their families is allowing them to save up money for a downpayment.) Among respondents saying they are unlikely to own by 2015, seven out of ten anticipate doing so at some point in the future. So, bottom line, 90 percent of gen-Yers plan on owning a home. Clearly, members of this generation are extremely optimistic about their residential futures.
By ethnicity, Hispanics’ ownership aspirations are stronger than those of their white peers. African Americans’ homebuying goals are somewhat more modest, though the difference is not statistically significant.
Of those who see themselves owning by 2015, 82 percent anticipate being in single-family homes, and another 5 percent envision living in duplexes or townhouses. Only 9 percent expect to own condos or co-ops. Among respondents who see themselves renting in five years, six out of ten expect to be in apartments; however, a high 35 percent envision renting a house, duplex, or townhouse.
Rental apartment building owners need not panic about losing their tenant base as a large gen-Y contingent moves to homeownership: this enormous generation will generate a steady flow of potential renters for years to come. In analyzing rental housing demand, market analysts historically focused on the number of young people turning 18, considering that the age at which high school graduates started to go off to work and begin to live independently or went to college and needed student housing. Thanks to “emerging adulthood,” young men and women are taking longer to leave the family house and to graduate from college. Consequently, the number turning 22 is a more appropriate housing demand indicator. In 2010, about 4.3 million gen-Yers reached age 22; the number will top 4.5 million by 2012 and remain solidly above 4 million for at least ten years—into the next generation. As a result, prospects are positive for both rental and ownership demand.
Survey respondents were asked to characterize themselves as city, suburban, small-town, or rural persons. If the small town and rural categories are combined, the overall distribution is essentially equal. This breakdown actually reflects respondents’ current locations, so the stated preferences are not wishful fantasies.
A higher proportion of singles call themselves city people, whereas married or partnered respondents are more inclined to identify themselves as suburbanites.
Differences by ethnicity are significant. For example, over half the Hispanic and black respondents identify themselves as city people—nearly twice the proportion of whites; and by contrast, far more whites claim to be small-town and country folk.
Ethnically, gen Y is America’s most diverse demographic cohort: 19 percent are Hispanic, 15 percent are black, and 6 percent are Asian. In the ULI survey, 6 percent of respondents identify themselves as biracial or multiracial. Many gen-Yers who have grown up in large metropolitan areas are essentially colorblind and are very comfortable with—and energized by—a wide range of cultures, music, food, and clothing.
In summary, a generation with 77 million–plus consumers creates enormous demand. Even if only 2 percent live in manufactured housing, for example, that is 1.5 million people. Gen-Yers represent market potential for every residential product except seniors’ housing. These young Americans inherited the dream of homeownership and are optimistic about being able to acquire a residence at a relatively young age. As mentioned, well over one-third have already done so. Gen Y’s location patterns will be similar to those of their parents, with two-thirds living outside central cities. More singles will remain in town while married/partnered households settle in suburbs, small towns, and rural areas.
This is not a radical generation. Its members are making traditional residential decisions once they move out of their parents’ homes—a move that is taking many of them a lot longer than it took previous generations.