This is the time of year when we tend to look back at the previous twelve months, and take stock as to where we were then and compare it to where we are now. Hopefully, most of us can look back and see progress made. The new year brings a new Administration. The Chair of the Federal Reserve System, Janet Yellen just announced the first significant interest rate hike in quite some time with promise that more will come. While none of us like to pay more money for the money we borrow, we can look at this rate hike as kind of a tap on the brake for an improving economy.
But what will the new year bring in the way of the housing construction industry? We’ve seen articles that point out the growth that this sector enjoyed in 2016 and projections that this trend will continue into 2017. I don’t have a crystal ball, so I’m not going out on a limb on this subject. Another prognostication that I’ve seen from more than one source is that many (if not most) of the buyers of new housing will be out of two groups; the millennials, and the boomers.
Who are the millennials? They are the ones that have never seen a black and white TV, or a cassette player in an automobile. They have never known a life without a personal computer or used a phone with a cord. These “twenty-somethings” are the largest population group since the baby boomer generation and they are starting to come into their own as income-producing and house-buying members of society. What kind of house will they want?
First, the trend that seems to be taking root can be summed up in three words; smaller is better. Chances are that you’ve seen the TV reality show “Tiny House Hunters”. While the structures featured in this show would be extreme by most of our standards, there is a legitimate move toward smaller and more utilitarian living. In the November 22nd edition of Realtor Magazine, it was pointed out that the average square footage of a new single family home dropped in the third quarter of this year, and this trend is expected to continue. This is caused by the homebuilders moving more toward the down-scale market instead of catering to the custom home business.
Millennials are also looking for open living spaces with as few walls as possible. Formal spaces are definitely “out” and it doesn’t look like they will be “in” any time soon. Cooking-Dining-Living space all in one large room is what appeals to millennials.
Another thing that millennials will insist on having is a living space that is technologically advanced and energy efficient. Think about it, millennials have grown up with their own cell phones, their own personal computers and now have more computing power than any generation that has ever lived. Programmable lighting as well as plenty of outlets will be must haves.
Energy efficiency and the use of sustainable components are popular and will continue to be. Whether you’re a believer in man-made global warming or not, let’s face it, the millennials have never lived in a time when being environmentally friendly has not been part of their education. Like so many of my colleagues, I’m being dragged kicking and screaming into the realization this is not a fad. The use of recycled materials is popular. I just appraised an urban row house than utilized recycled corrugated steel for its siding.
Those born after World War II and through the early 1960s (of which I am one) are either in their empty nest years or will be very soon. Their needs are adjusting from housing that is an easy commute to the office and school carpooling, toward being centered on family, friends, and outside activities. Many boomers may not want to move very far from where they raised their families. Staying close to their children or grandchildren and keeping their circle of friends will be important. Others will want to adopt the “resort” lifestyle and will re-locate.
Whether staying put or moving to another area; there are a few items that boomers will find attractive in new housing. These include:
Recreational facilities: Builders should consider this when planning their communities. Walking trails, fishing lakes, and community rooms with exercise centers are popular. These features are being used with greater frequency in “50+” communities.
One level living: Boomers with bad knees and aching joints don’t want to climb stairs. This is why housing with first floor bedrooms and baths will best cater to the boomers.
Wheelchair accessibility: For boomers who want to stay in their houses as long as possible, new housing that accommodates wheel chairs and walkers will have greater appeal. Oversized walk-in showers will also be a popular item.
Low maintenance: This will possibly be the most popular feature of any new housing that caters to the boomer generation. Most of all, an aging home-buying public will want to have the time flexibility that care-free maintenance affords. New housing developments with maintenance costs covered by a homeowner’s association will be have an advantage over those that don’t.
So, what does this information mean for appraisers? It all boils down to the same conundrum that has been on the minds of home builders since the first tract development ever broke ground–how best to cater to the needs and wants of the home-buying public at a price that attracts the widest audience of potential buyers.
Staying on top of a burgeoning market (millennials) and forecasting the future of home building for an aging population (baby boomers) should be on the minds of homebuilders in every community. Knowing what features are the most marketable and knowing their worth is even more important for the residential appraiser in 2017.
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