4 Big Ways Millennials Are Shaking Up the Housing Market
The trillion-dollar real estate market in the United States is quickly evolving. A big part of the shift away from home ownership and towards renting can be attributed to characteristic differences in the Millennial generation, who tend to not only have different attitudes and preferences towards housing and home ownership, but who are also growing up and “adulting” in an economy and environment that looks very different from the one their parents grew up in.
This has given rise to co-living as an alternative. An increasing number of younger renters are willing to live in smaller spaces and pay a higher price per square feet, in exchange for access to more value-added services, from housekeeping and concierge services to swanky amenities.
This article looks at four Millennial-driven trends and how they are transforming the housing market: a growing gig lifestyle, a growing desire for location independence, shifting social norms, and undesirable housing inventory.
#1 - They're facing rising costs of living and are turning to a gig lifestyle to cope
Today, the 9 to 5 schedule is practically extinct, with technology and the internet allowing people to work across around the clock across geographical locations in a seamless, connected way, blurring the lines that clearly separated working hours and non-working hours.
Technology has also changed where people work – instead of being stuck at a cubicle, working out of coffee shops, in hotel lounges, or on a park bench is no longer a novelty but the norm. Due to rising costs of living, one job is not enough for many people to make ends meet. Many are choosing to pursue “side hustles”, such as freelancing on the side or driving for Uber, or to be “full-time gig workers” working at more than one job simultaneously. Freelancers are predicted to become the U.S. workforce majority within a decade, with nearly 50% of millennial workers already freelancing, a 2017 annual freelancing study found.[1]
#2 - They have a growing desire for location independence
While some may be working side gigs out of necessity rather than choice, the younger generation also tends to be more embracing of a nomadic, location-independent lifestyle. According to a study by the Boston Consulting Group[2], Millennials report a greater desire to visit every continent than preceding generations, and have greater interest in cultural experiences and international travel – with the effects being significantly delayed home ownership. Compared to home ownership levels of above 50% when the preceding generations were 25 – 34 year olds, only 39% of the 25 – 34 year olds of today own a home – a figure which is predicted to continue declining further.
#3 - They're shifting social norms - from living with spouses to living with roommates
Millennials are marrying later and remaining single for far longer than previous generations. In 1975, a 57% majority of young adults aged 18-34 lived with a spouse. In 2016, only 27% of young adults lived with a spouse, while the proportion living with their parents or other roommates increased[3]. A variety of factors may contribute to this trend – economic pressures of student debt, fears of financial instability with recent recessions still fresh in their minds, or Millennials’ desire to “find themselves” or establish their careers before settling down.
With an ever-increasing number of people flocking to tech hubs and big cities in search of jobs and better opportunities, choosing to delay marriage, this has created a new social challenge. Newcomers to a neighborhood face the challenge of meeting new people and finding a community amid busy work days. To address this need, more and more companies are establishing co-living residences in major cities, betting their money that this shared human desire for connection and community will pay off in the long run.
#4 - They're facing an undesirable real estate market and renting for longer
The real estate market in the United States today is facing historically low levels of housing inventory in the middle and entry-level tier of the market. With rising prices, potential mid-level home buyers are unable to afford a housing upgrade, and are deciding to stay in what was intended to be their starter homes. Because many owners of starter homes are deciding not to leave and sell their properties, there is now a shortage in the market for new or younger buyers who are looking for starter homes but have nothing they can afford. This causes them to delay home ownership altogether and continue renting for longer.
In conclusion…
All of these reasons combined have led to a growing demand for the alternative residential options that co-living provides. As with any major change, there will emerge winners and losers.
However, the rise of co-living and its long-term impact is still an unfolding story, shaped by multiple forces in the market. What will remain constant, regardless of fluctuating rent and prices, is that the ability to understand customers’ needs and to provide the ultimate amenity – service – will always be of relevance to companies wanting to earn their slice of the lucrative real-estate pie.
Sources:
Upwork and Freelancers Union, Freelancing in America. 2017.
BCG Perspectives. Traveling With Millennials, March 2013.
Stateline, Huffington Post. For Many Millennials, Marriage Can Wait. (Dec 21, 2016). https://www.huffingtonpost.com/entry/for-many-millennials-marriage-can-wait_us_58594a53e4b0630a254235b6