By John Burns, CEO of John Burns Real Estate Consulting
Busy real estate executives need people to get to the conclusions, so here you go. We spent more than 9,000 hours researching demographic shifts, and believe the greatest demographic opportunities over the next 10 years will be:
Real Estate Demographic Shifts
1. 38 percent more people over the age of 65. Most of growth in the population 65 or older – which will reach 66 million people by 2025 – will be young Baby Boomers born in the 1950s. They are 7 percent more likely to work than their predecessors, which means 25 percent will be working full-time. Demand for higher-density, lower-maintenance living has already surged, and we coined a term called “surban” to describe urban living in suburban environments. These active retirees will keep their cars, but don’t want to spend much time in them, and they want to be near their kids. More than ever, we expect they will be providing down payments to the kids too, in order to keep the kids living nearby.
2. 8 million more working women. Women now earn 58 percent of all college degrees, and now earn more than their spouse or partner 38 percent of the time – a stat that has been rising 0.4 percent per year. Men and women, particularly those born in the 1970s, are willing to trade a large house for a home closer to work so they can be near their kids. While the percentage of 20- to 64-year-old women choosing to work has fallen 3 percent since 2001, the percentage of men has fallen 5 percent. The real estate needs of these 78 million women will vary. The one common thread will be how busy they are.
3. 8 million increasingly affluent immigrants. Clearly, elected officials can affect this dramatically. For example, three immigration laws in the 1980s gave rise to more immigration over the subsequent 20 years than the prior 60 years. However, today’s immigrant tends to arrive on an airplane from China, Brazil and other countries where the economies have been booming. While most expect some slowing in those economies, the pent-up demand to move to the U.S. remains large.
4. 25.8 million newly formed households
13.3 million of which will move to a household abandoned by someone who passes away or moves into an assisted living facility. The net gain will be 12.5 million households, which is an 86 percent increase over the paltry growth from 2005 to 2010. The record number of people passing away has been one big reason that net household formation has been slow. Nonetheless, these 25.8 million want to live differently than prior generations, and will fill their homes up with all sorts of technology. While more people than usual have been living urban too, three times as many live suburban.
5. 62 percent of the growth heading south, where 42 percentof America currently lives. Plenty of jobs, affordable housing and warm weather will make Texas, Arizona, Nevada, Florida, Georgia, North Carolina and surrounding states the growth engine.
6. Renting, which will take market share. Eighty percent of the tremendous number of people passing away own their home, making it very difficult to prevent homeownership from falling. With mortgage interest and property taxes on most homes already less than the standard deduction, the tax benefits of homeownership have been greatly reduced. The foreclosure scars of the last recession haven’t faded either. People want to own their own home but, more than ever, are going to proceed more cautiously, waiting until they are confident in their job and savings before taking on a mortgage. Our best estimate is that homeownership will fall to 60.8 percent in 2025.
These are just some of the highlights from a book Chris Porter and I just published called Big Shifts Ahead: Demographic Clarity for Businesses.
It comes with 100 color charts and 2 tools for making demographic analysis much easier
1. Define each generation by decade born. Every generation will be 10 years long. The math will be easy – those born in 1980 turn 37 this year. The generations will have far more in common than current generational definitions that can be up to 20 years long. It will make it easier for you to understand their backgrounds and attitudes, something we summarized in the book. We gave each generation a name based on the shift they led in society:
• 1930s Savers
• 1940 Achievers
• 1950s Innovators
• 1960s Equalers
• 1970s Balancers
• 1980s Sharers
• 1990s Connectors
• 2000s Globals
2. Apply the 4-5-6 Rule. We grouped all of the external factors that influence demographic behavior into four main categories:
• government policies,
• economic cycles,
• new technologies, and
• societal shifts.
We noted how each policy, cycle, technology or societal shift affected groups differently, depending on where they were in five life stages we describe. This framework will also help you adjust your strategy when one of the big four influencers (government policy, economic cycles, technologies, and societal shifts) changes unexpectedly. By doing this, you will better be able to answer the six who, what, when, where, why and how questions you are asking about your business.
We live in an exciting time when American businesses can capitalize on rapidly changing demographics. These changes will impact the type of homes, offices, retail and storage spaces America needs, and where America needs them. Group the generations by decade born, and use the 4-5-6 framework to make decisions more easily.