What’s Going On?

Birth Rate Decline indicates smaller homes should be the focus of new home builders.

The birth rate has declined since 2007! Family new home demand is booming! Consumer surveys report Americans more thrifty! House prices moving up across the country! McMansions making a comeback! Households getting smaller! These contradictory news stories in 2013 make it difficult for homebuilders of all sizes to formulate strategic plans for future growth in what appears to be growing demand for new homes—but what type of new homes?

The housing market enjoyed seven straight quarters of growth at the beginning of 2013, with over 48,000 new construction jobs reported in February, Nationwide resale housing median prices rose by 10 percent in February with inventory levels dropping to 12-year lows. Some “experts” state that increasing buyers are generated by latent demand from the household growth since 2008. Others report the tremendous house purchase programs of corporate buyers, turning single family homes into rentals to compete with the booming rental apartment market—these investors have driven sharp sales and price increases in big swing markets such as Las Vegas and Cape Coral, Florida, where large price jumps still leave low prices comparable to 2003 levels. Still others focus on the rise in intergenerational families with both young people returning to the nest and older people living longer, in addition to the rising Latin population that has traditional multi-generation households. In fact, Lennar Homes believes so strongly in the multi-generational market that it has introduced a new “Next Gen” model in the Tampa market that features a complete one bedroom apartment with separate entrance within a family home—it can accommodate any of these mixed households.

Despite all of these current, often conflicting, market trends, competent multi-year planning for builders and developers should be founded on the basic demographics of the country’s population—a population which has experienced the surge of baby boomer families demanding bigger and higher quality homes in the 1990s, followed by the much smaller households of Generation X consumers in the new century, and now followed by the huge Generation Y children of baby boomers who are expanding our colleges as well as our unemployment ranks (but not births). These major consumer groups are further affected by regional and local variations, including the retiree market in the Sun Belt and the student market in college towns. Know your consumer has become a more complex task than ever before.

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