Generational Homebuying
When Brook Patterson and her then-fiancé, Dan, bought their first home in August 2010, the couple, in their mid-twenties, wanted a Craftsman-style residence with at least 3 bedrooms and 2½ baths that was relatively new and wouldn't require extensive remodeling. Their search brought them to the Lazarus-Shouse homes in the Simpsonville area. Now married, the Pattersons are among the first of their friends to be homeowners, with most still living in apartments and other short-term accommodations.
According to Michael Dey, executive vice president with the Home Builders Association of Greenville, as more members of Generation Y, born between the mid-seventies and the year 2000, join Brook and Dan in entering the housing market, conditions should start to improve.
Dey has delved into data to gain an understanding of the housing downturn of recent years, and according to what he's found, it's all in the numbers. The lowest birth rate years in the nation since World War II occurred from 1973 to 1976. When people born in those years reached the average age of the first-time home buyer, it was from 2003 to 2009. "So what we had there was a period of time where there was very low demand for people who had to have a home," Dey says. "That started to drag the housing market down. Those who were buying a home because they wanted to — the discretionary buyers — started to lose confidence in the market, and they stopped, too."
Dey describes that low demand as the first domino, the one that led to the topple of all the others. "It was demand that started the dominos falling," he says. "And it was all of the things that we saw happen in financial markets that were the result of the fallen demand. They didn't cause demand to fall. They were the result of falling demand."
With members of Generation Y buying, demand should return to the strong levels that existed when their parents, the Baby Boom Generation, came along. A generation of 80 million people born post-World War II, Baby Boomers reached home-buying age around 1970 or so, according to Dey, and drove demand until around 1990. At the same time, discretionary buyers — those moving up into something bigger or better — had confidence in the market and felt comfortable making discretionary housing decisions.
Generation Y is a large group, too. Some estimates place this group at around 80 million people — a match for Baby Boomers in terms of influence on the housing market.
One difference between Generation Y and the two groups that came before it — the Baby Boomers and Generation X — is that many of today's young people have graduated from high school or college and are unable to find the job they expected to qualify for based on education. "The bottom line is when unemployment comes down, the housing market will turn around," says Nick Sabatine, chief executive officer with the Greater Greenville Association of Realtors. "Most of the people who are unemployed are the recent graduates who can't find the job they were trained to do, and that certainly has affected the housing market."
What do younger buyers want in a home? Both Dey and Sabatine say this generation is looking for urban over suburban. They want to be closer to their place of employment, Sabatine says, and because housing in urban areas can cost more than suburban options, they balance savings on gas with savings on housing.
Sabatine says that unlike earlier generations, young buyers don't want leisure time to mean spending hours with the clippers and the lawnmower, so many are opting for smaller lawns or no lawns. "Downtown Greenville is a prime example of this," he says. "There are so many things to do downtown on the weekends that people don't want to stay home and maintain the lawn."
Brook and Dan Patterson were typical of their peers in that they weren't looking to spend their weekends doing yard work, yet they still wanted to have a lawn. Their Simpsonville neighborhood requires that residents pay for weekly yard service. "We pay a monthly fee along with all of our neighbors so that all yard work is taken care of by a single outside vendor," Brook says.
While the needs of the first-time home buyer are changing, the habits of the discretionary buyer are different, too. More of today's buyers are downsizing or cutting expenses rather than moving up. According to a Realtors.org article, the share of people who moved because they wanted to get into cheaper housing increased from 7 percent in 2004 to 11 percent in 2009.
Greenville County's rate of home ownership is lower than that of the state and just slightly ahead of the national rate. According to census data, 68.2 percent of the county's citizens are homeowners, while 72.2 percent of the people in the state own a home. The nationwide rate is 66.2 percent.
Sabatine says incentives are needed to increase the rate of homeownership by drawing more of Generation Y into the market. "If the federal government will come back and reinstitute an incentive for first-time home buyers or young professionals, college graduates, or whatever the case may be, that will certainly help as far as getting out of Mom's bedroom and into their own house," he says.
When Generation Y fully enters the market, Dey says, a normal housing situation will be restored. Once non-discretionary home buying picks back up and starts to generate real estate transactions, the people who sell to these consumers will have the confidence to move up — a domino effect once again, but with positive effects.