Builders May Expand Smaller, Entry-Level Offerings

Industry News ,

Originally Published by: John Burns Real Estate Consulting — May 7, 2021
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The largest age group in the US today is 27 to 31 years old. With the median age of an entry-level buyer at 33, according to the National Association of Realtors, we believe demographics will continue to support strong home buying demand for the next several years. To attract the younger buyer, we highlight our housing, demographic, and consumer research which leads to opportunities in marketing and home design.

2020 US Population by Age

Housing: The Young Buyers Are Already in the Market.
In our latest monthly Burns Housing Survey from the Front Lines, builders that focus on entry-level buyers are reporting the strongest sales. Several home builders in our mid-month check-ins noted the younger age group is buying more expensive homes than they used to: “Younger buyers (<35) are stronger than in the past, and many times are the ones spending in the upper end in our neighborhoods.” As entry-level buyers are a bit older than they have been in the past, they are more likely to be in a better financial situation.

While some younger buyers may be in the market for higher-priced homes, there is certainly a segment of this cohort that is looking for affordability, which is becoming more of a challenge in today’s rising-price / low-inventory housing market.

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Todd Drummond

Demographics: Part of the Tradeoff for Affordability May Be Home Size at the Entry Level.

The CDC reported this week that births declined in 2020 to the lowest level since 1979. With fewer babies being born, perhaps the home of the future has fewer bedrooms.

Much has been made in the press about the delay in “adult” milestones for Millennials. But as the chart for 30-year-olds below shows, this is nothing new—  these are decade-long trends. Over time, most young adults will still get married and will still have kids; hitting adult milestones later doesn’t mean never hitting them. In the meantime, the trend suggests significant demand in the coming years.

Percentage of 30-year olds hitting adult milestones

Consumer Research: Reframe the Message

The combination of our housing, demographic and consumer research presents a great marketing and design opportunity for builders: rather than focus on just bedrooms and bathroom count, why not advertise a home as “3 bedrooms, 2 bathrooms and 2 home offices?”

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Even if fewer bedrooms are needed, the work-from-home environment emphasizes the need for private, flexible spaces, even if they are small. Simply having a spare bedroom in which you put your desk does not equal a functional home office or workspace. A niche or a nook tucked off a common area, or a small private space to make phone/video calls can be suitable alternatives to a private office.

Young singles and couples without kids are most willing to sacrifice storage space—more so than any other life stage group we surveyed—to improve their work-from-home space, perhaps because they have fewer possessions accumulated and are greater adopters of the sharing economy.

Tradeoffs young singles and couples

The most successful builders are going to be the ones that build to their consumer preferences. We’re tracking these trends every day.