Many economists forecast that the housing sector will lead us out of the downturn. But with consumer confidence still deflated, which consumer segments are really driving the uptick in home sales and what are they looking for?
It certainly looks as if the housing market is rallying. According to a report issued by the U.S. Housing and Urban Development and Commerce Department, single-family permits increased by nearly 12% in May and total housing starts reached a seasonally adjusted annual rate of 974,000 units.
Interest rates are expected to remain low until 2022, housing prices are stable, and mortgage applications continue to increase.
Even so, uncertainty still abounds. States like Texas, Florida, and Arizona are reporting record high Coronavirus cases, hospitalizations, and deaths, and health experts predict that a hard-hitting second wave of the virus will rear its ugly head in the Fall.
According to McKinsey, 80% of U.S. consumers assert that they want additional assurances before they engage of out-of-home activities, namely approval of medical authorities and enhanced cleaning and safety measures.
In reality, the new “Homebody Economy” facilitated by the pandemic presents some interesting opportunities for the housing sector: as consumers spend less money on restaurants, travel, recreation, gyms, and services, they’re investing the spare cash that they do have into their homes.
In fact, according to COGNITION Smart Data, Green Builder Media’s market intelligence and data services, DIY home projects like painting and landscaping exploded over the past two months, and now contractor-based services, like kitchen redesigns, are on the rise.
Without doubt, as the housing market does rebound, it will be Millennials and older Zoomers (now reaching their mid-twenties) that will be the pied pipers—which shouldn’t be surprising given that these two generations weigh in at a whopping 83 million and 67 million individuals respectively.
While there are differences between Millennials and Zoomers, they are aligned in a few pivotal ways: they have a strong ethic of sustainability; they are totally at home in the digital world; and they’re settling down, starting families, and hitting their peak homebuying potential.
Nearly 40% of Millennials and older Zoomers were already in the housing market before the pandemic, and, even with the downturn, experts believe that number has grown due to increasing dissatisfaction with current living situations.
Many of the potential homebuyers in this audience segment are dual-income, college educated couples that are living in dense apartment buildings.
While they are looking for more space, they still want compact floorplans, low monthly payments, and smart homes that are sustainable, efficient, and healthy.
According to COGNITION, many of these homebuyers believe that connected living technologies like smart thermostats, security, lighting, IAQ sensors, and leak detection, should be included as a standard offering (as opposed to an upgrade).
Furthermore, this eco-conscious buyer group believes that health and wellness is a fundamental homeowner right and that good indoor air quality is as important as location when making homebuying decisions.
COGNITION data reveals that this group of homebuyers indicates strong purchase interest in solar technologies (including photovoltaics, storage solutions, and power management systems) to reduce their carbon footprint, decrease energy bills, and increase self-sufficiency. They even consider the ability to net meter, or feed energy back to the grid, a badge of honor.
Individuals within this audience segment aren’t just comfortable with remote working, many of them have spent their entire careers telecommuting or in shared office spaces. Consequently, as they upgrade their living situations, they will require well-designed work spaces, streamlined connectivity, and redundant technology to keep hubs, routers, servers, security systems, and backup power supplies functioning.
They also prioritize a work-life balance that incorporates home fitness and healthcare, with special areas dedicated to home gyms or trending “sanctuary spaces” for yoga, meditation, and contemplation.
Connection with nature is also paramount, driving demand for private outdoor spaces (yards, patios, balconies, and rooftop gardens) and access to trails, community gardens, and other similar amenities.
These buyers are intrigued by small footprint living, and while they may be looking for more space, that translates into upsizing from 800-1,000 square feet to 1,200-1,500 square feet (no McMansions here!)
COGNITION data also shows that these buyers are looking to move out of higher priced, denser urban areas into inner suburbs (medium-density environments), outer suburbs, and even rural areas.
Not only is this powerful audience segment influencing home design, construction, and product specification, they’re also impacting the way that homes are purchased. This group, totally comfortable making large purchases online, are already driving the digitization of the housing market, as indicated by the massive uptick in 3D home tours.
For more information about key audience segments driving the housing sector and how shifting consumer expectations will place new demands on the housing sector, sign up for a COGNITION subscription.
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