Early findings from an upcoming survey being published by the Urban Land Institute (ULI) suggest that the echo boomer generation, or Gen Y, holds a high view of the American Dream – despite the housing market collapse — with the majority of respondents expecting to own homes within five years.
At nearly 78 million, Gen Y, aged 15- to 32-years old, is now the largest generation in the U.S. It comprises 25 percent of the population, just surpassing baby boomers, which represent slightly under 25 percent. The nationwide survey, conducted during the summer of 2010, drew responses from 1,241 Gen Yers. The research focuses on 18- to 32-year-olds, who have finished with high school, are in the labor force, or are attending vocational schools, colleges, or universities. Sixty-four percent of the respondents are aged 25 to 32; 36 percent are 18-24.
The preference for homeownership is demonstrated by the number of respondents who already own homes as well as those who intend to be homeowners. Thirty-six percent of the respondents (primarily the oldest in the group) own homes, suggesting that they may have purchased when home financing was easily accessible prior to the recession, or that they took advantage of the recent federal home buyer tax credit. Moreover, while the largest percentage of Gen Yers currently rent, live with their families, or live in student housing, more than 70 percent expect to own a home by the time they reach their early thirties. Sixty-seven percent of all the respondents expect to own homes by 2015. Seventy-three percent of those at least 25 years of age and 78 percent of those aged 30 to 32 anticipate owning by 2015.
While such high expectations for homeownership are hopeful, they may fall short of reality, as the fallout of the recession, weak employment, and housing finance reform could affect the purchasing prospects of Gen Yers for years, ULI’s chief executive officer Patrick Phillips explained. “The good news is young people have high aspirations — they want to be home owners, both in cities and in suburbs. The bad news is there may be a serious disconnect between their goals and the realities of both the job market and the credit market, particularly in the near- and mid-term.”
The survey is nationally representative of the generation, as categorized by ethnicity, income and level of education. According to the findings, Gen Y is more ethnically diverse than baby boomers, with nearly twice as many Hispanics, and slightly more African-Americans and Asians.
More than half the Hispanic and African-American respondents, 51 percent and 54 percent, respectively, identified themselves as urban dwellers, compared to 28 percent of the white respondents. Just under one-third of the Hispanic and African-American respondents characterized themselves as suburban dwellers, while 36 percent of the white respondents listed themselves as living in suburbs. Sixty-eight percent of all respondents live in either the suburbs or urban neighborhoods, reflecting the nationwide trend of increasing urbanization.
The sheer size of the Gen Y generation means it will have enormous influence on the real estate industry and the economy in general – an impact likely to be as striking and long-lasting as that of the baby boomers, ULI Governor Leanne Lachman, president of Lachman Associates and author of the study, said. “As America’s emerging retail and housing consumers, their (‘echo boomers’) activities are crucial to our economic recovery and beyond,” she said. “These young people deserve more attention than they are getting.”
Eighty-two percent of the survey respondents who said they anticipate owning by 2015 expect to be living in a single-family home, far outstripping the percentage who expect to own a condominium, duplex or townhome. Sixty percent of the respondents who anticipate renting in 2015 expect to be renting an apartment, while 28 percent expect to be renting a single-family home.
The price of housing – in terms of monthly mortgage payments or lease payments — ranked as the most important feature, outweighing other features such as green building. As more Gen Yers enter the housing and employment market, the data suggest that “the most promising segments for the housing industry could be smaller, more modest homes and apartments,” Lachman said.
The survey’s confirmation of the desire of Gen Yers to own a home is counter to widely held assumptions that the housing market collapse and mounting foreclosures had soured this younger generation on homeownership, Phillips noted. However, the “wild card” – not reflected in the early survey responses — is Gen Y’s preference for ample free time, and a propensity toward a sense of community, diversity, and places (either virtual or actual) to gather and share information, ideas and opinions.
This need for interaction and instant, constant connections to others will likely influence their purchasing decisions when they actually buy, Phillips said. “We can expect Gen Y to gravitate toward walkable, close-in communities, choosing housing on outer edges only as a last resort because it is the most affordable,” he said. While many Gen Yers may see themselves as ultimately living in single-family homes in the suburbs, “this does not mean they want to live in sprawl,” he said.
Gen Y is entering the housing market during an era when “saving time matters most,” – a key difference from when baby boomers entered the market, and one that will result in more efficient development that offer transportation alternatives, and which reduces the need to drive. “Going forward, we’ll see smaller homes on smaller lots, and suburbs with an urban feel, near employment and shopping. The expectations of echo boomers, in terms of their lifestyle as homeowners, “will cause suburbs to grow differently than they have in the past,” Phillips predicted.
The complete report, with an analysis of the findings, is expected to be available from ULI by the end of November.