New American Dream? Many Millennials dream of living in Eco-Friendly urban apartments like these hip Rosa Parks models in Chicago.
"The first time buyer has really fallen away," notes NAHB Chief economist David Crowe, speaking this morning in Houston, at the annual NAREE conference."Builders are now only selling at the upper end of the spectrum. People are buying only if they already have good credit, and house sizes are larger than ever."
That statement may not surprise you, but it's a rare admission from the NAHB.
Another big theme, touched on by both economists and homebuilders in today's panels, was that a lack of good jobs is the black hole that has shattered the single-family home market, which has shrunk by almost 50% over the last couple years.
"Until people have jobs, they're not going to have the confidence to make the biggest purchase of their life," notes John Johnson, of David Weekly Homes. Investors on another panel pointed out that it's not a lack of jobs per se that's the problem, it's "the fight for talent," --hiring highly skilled white collar science and tech workers and retaining them. But in my view (as the father of a Millennial), they simply can't fathom the depth of the cultural shift that's happening.
Millennials are like cats. They don't like to be boxed in or herded in the direction corporations would like. They care about the environment. It's in their DNA. Some corporations are trying to attract qualified immigrant talent--even lobbying in Washington to relax immigration laws. But with immigration laws as strict as they are, that's likely to remain a limited pool. And Millennials are expected to constitute 75% of the labor force by 2030. So until and unless they start pulling regular salaries, and Millennials start to share suburban dreams like their parents, it's unlikely that the old world of single-family production housing will return to its glory days.
For people between 20 and 25, they're completely stressed out by their student loans, and they're not thinking about borrowing another 250,000 for a home," says Anthony Hsieh, Founder and CEO of Loan Depot. "We need to make buying a home fun again. It's not. They don't want to go through that process."
"What about rolling student loan payments into thir mortgage," one attendee asked.
"Banks are just not that innovative with home loans," Hsieh says. "We need more creative financing like that."
So where's the silver lining?
Millennials as a group still need housing, but they want something different: a live-work-play lifestyle. That means urban living, walkability, jobs that matter versus huge paychecks.
Trends show that migration to urban areas is on the rise, an essential reversal of sprawl that can restore biodiversity, reduce per capita resource use in part by reducing transportation footprints.
"Suburbs are going through an intense re-invention," says John Sikaitis, with investment firm Jones Lang LaSalle. "Office buildings have been left obsolete. If you've got no amenities, no transit, no walkability, you've got no story. We're not saying the suburbs are dead, but office space has to have a sense of place.
"It's a landlord market again," he adds. "When you're talking about walkable dense markets, those are performing at vacancy levels a third of those in suburban areas. We're forecasting 17% rent growth and construction activity over the next three years.
Even the move toward larger homes may not be as foreboding as it sounds. In some markets, says Will Hunter of Trendmaker Homes, those new homes include space for two families. Multi-generational living is beginning to take shape, as we predicted in our Celestia Project.