For much of the last couple decades, a homeowner could be expected to start looking for another home, on average, around the 4-6 year mark. The reason for that being a life change such as a new job, growth in family size, or time for downsizing. Real estate agents could then count on repeat business more consistently and frequently.
In fact, between 2000 and 2007, the average homeownership tenure was just 4.21 years.
Recently, however, that short tenure is no longer reliable. Homeowners are staying put for much longer – now between 7 and 13 years.
So what has changed? A couple things are factoring into this:
Of the more than 75 million Americans that fall under this generation, many have changed their home buying habits. According to an article by the Chicago Tribune, those born between 1946 and 1964 are clogging up the housing market by staying put. In fact, of the 76% of baby boomers that own a home, 88% of them intend to renovate within the next three years.
Not only are they not interested in downsizing or moving to a non-maintenance-type environment, they’re actually doubling down and putting more money into their residence.
This has created a bottleneck of sorts in the once typical homeownership cycle. Now, first-time homebuyers are looking for homes, but inventory is being held up, affecting nearly 1.6 million homes on the national market.
But why the sudden change in their ownership tenure?
One reason is that they are holding out for a higher value return on their home. In the study, 66% of the baby boomers believed that their home values would soon rise. However, that is an unknown of how long that could take.
Another is that not as many baby boomers are interested in moving to independent living or assisted living communities. In fact, a study found that nearly 65% of this generation would prefer to receive any sort of retirement care from the comfort of their own homes.
Larger Houses and Smaller Family Sizes
In the past, the standard order was: buying a starter home, upsizing after having children, and then the empty nesters downsizing once the children have moved out.
That’s simply not the case anymore, as so-called “starter homes” have been large enough to contain the average family size in the U.S. In 1987, the median square footage of a one-family home was 1,725. In Q3 of 2019 the median square footage was 2,279 – a 32% increase in size.
Also, between the 1940s and the mid-1960s, the average family household size was nearly 4 people. Since 1970, that number has been on the decline, and in 2019, it landed at around 3 people per family household. For all households, that number was 2.5 people, a near-28% decrease since the mid 1940s.
So with starter homes increasing in size and family size on the decline, families simply have not needed to upsize like they used to – allowing them the comfort of staying in the same home for much longer.
Potential Reversal in These Trends
While the current outlook has been unfavorable for inventory, the year 2019 kicked off a monumental demographic shift in the U.S., as the Millennial generation (those born between 1981 and 1996) officially outnumbered the baby boomer generation.
That means that a large chunk of the population will either be moving into their first home (younger half of the Millennial group) or they will be getting married and having children (older half of the Millennial group) and potentially needing a larger home. According to U.S. Census data, those aged 27-28 are the highest likely demographic to get married in 2019.
With Millennials now firmly in control of the U.S. demographic makeup, including those highest likely to get married (and then have children), we could potentially see a spike in family size, and subsequently moves, over the next five years that has been unseen since the early 2000s.
Recommendation for Realtors®
Now that the data has been laid out in regard to the next five years of real estate, agents need to realign their approach to better cater and communicate to the generation that is looking to buy now, as opposed to the one looking to sell later.
Part of engaging with Millennials is first knowing where they spend their time. For example, Millennials account for roughly 40% of Instagram’s daily usage – so that’s a good place to start. Here are some tips on how you can stand out on that platform.
Also, it helps to better understand this generation as whole. What are their spending habits? What are their reservations pertaining to homeownership? Do they fully grasp the loan options available to them? Understanding how to better speak with them helps ensure they feel more confident during the home buying process, and thus lead to more transactions.
Understanding the data and trends, and shifting your focus accordingly will give you a distinct advantage in the future.
“Average Homeowners Stay 8 Years Before Moving.” Realtor Magazine, 3 May 2019, https://magazine. realtor/daily-news/2019/05/03/average-homeowners-stay-8-years-before-moving.
“Baby Boomers Creating ‘near-Gridlock’ by Aging in Place.” HousingWire, 25 June 2019, https://www.housingwire. com/articles/49414-chicago-tribune-baby-boomers-creating-near-gridlock-by-aging-in-place/.
Bowers, Lois A., et al. “79% Of Middle-Income Baby Boomers Have No Savings for Retirement Care: Research – News.” McKnight’s Senior Living, 20 May 2019, https://www.mcknightsseniorliving. com/home/news/79-of-middle-income-baby-boomers-have-no-savings-for-retirement-care-research/.
Cilluffo, Anthony, and D’Vera Cohn. “6 Demographic Trends Shaping the U.S. and the World in 2019.” Pew Research Center, Pew Research Center, 11 Apr. 2019, https://www.pewresearch. org/fact-tank/2019/04/11/6-demographic-trends-shaping-the-u-s-and-the-world-in-2019/.
Cleaver, Joanne. “Chicago Housing Market Hurdle: As Baby Boomers Stay Put, Millennials Struggle to Find Starter Homes.” Chicagotribune. com, Chicago Tribune, 20 June 2019, https://www.chicagotribune. com/real-estate/ct-re-millennial-baby-boomer-housing-shortage-20190623-story.html.
“Why Are People Staying in Their Houses for so Long?” HousingWire, 9 Jan. 2020, https://www.housingwire. com/articles/why-are-people-staying-in-their-houses-for-so-long/.