Monday, November 28, 2011

Are Echo Boomers Dumping Real Estate?

Column Quick Summary:
  • Low marriage rates will probably equal low home-ownership rates.
  • Housing requires time and money many singles do not have, especially single mothers.
  • Males seem to have other interests as well outside of home-ownership.
  • Currently, no socioeconomic trend indicates an upward trend in housing among the Millennial generation.

A while back, I posted Female Renters: Priorities Shifting? However, note from the linked Wall Street Journal article:

The factors driving this growth in single-mom renters are diverse, some of which were expertly explored in The Atlantic this month by Kate Bolick. As Ms. Bolick notes, 40% of children are now born to single mothers; and marriage is happening later and later (now at 28 for men and 26 for women), or not at all. Others have noted that single moms may also prefer renting to owning a home so they can avoid maintenance headaches.

Emphasis added

A couple of factors for real estate agents and those who work in the housing industry to keep in mind, especially when we evaluate socioeconomics and housing:
  1. I predict that serial monogamy won't produce the homeowners that marriage produces. There are multiple reasons for this: potential school system advantages, a similar demographic make-up, a stable environment. These opportunities tend to attract married individuals, especially the last one (stability) as people who are attracted to stability find marriage appealing.
  2. While working with customers, single moms of the Millennial generation reported home-ownership as a goal, but from a realistic perspective, there are multiple time and financial constraints regarding home-ownership (see "Should I Rent or Buy" for more details). Unfortunately, hindsight is 20-20 here: after the time and money on maintenance, taxes, insurance and mortgage payments take place, you might see some sell their homes at a financial loss.
  3. Single males seem to also lack interest in owning a home, though at this present time, single male Echo Boomers are more likely to be homeowners. There are arguments about this trend as well: for instance, do males generally buy homes when they don't marry? Consider this argument:
    Now meet the twenty-first-century you, also 26. You’ve finished college and work in a cubicle in a large Chicago financial-services firm. You live in an apartment with a few single guy friends. In your spare time, you play basketball with your buddies, download the latest indie songs from iTunes, have some fun with the Xbox 360, take a leisurely shower, massage some product into your hair and face—and then it’s off to bars and parties, where you meet, and often bed, girls of widely varied hues and sizes. They come from everywhere: California, Tokyo, Alaska, Australia. Wife? Kids? House? Are you kidding?
The United States is watching how socioeconomic factors are changing economic demand. If the housing industry could rely on increased housing demand as a population increased in the past, it must now prepare for a massive generation which has a large portion of individuals who may never want homes. At least, for now, I don't see a huge future housing demand coming from Echo Boomers. To answers Mish's question about U.S. real estate being undervalued: no, if we assume that much of the future demand of housing will come from Generation Y. They either aren't ready or they aren't interested.