In the coming years, there are going to be more homebuyers and they may not be who you expect. That’s according to Joel Kotkin, a panelist at this week’s Pacific Coast Builders Conference, or PCBC. The conference is sponsored by the California Building Industry Association.
Held yearly at San Francisco’s Moscone Center, PCBC attendees include builders, investors, developers, manufacturers, scientists, architects, environmental engineers and landscapers, among others. One of this year’s hot topics focused on who these professionals can expect to cater to in the coming years.
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By 2050, the U.S. population will have grown to 400 million from 310 million now, Kotkin said. Kotkin is the author of "The Next Hundred Million: America in 2050," published in February. He also recently wrote an article, "The War Against Suburbia," in The American, the journal of the American Enterprise Institute.
According to Kotkin, the U.S. is unique among advanced, developed countries in that it can expect to both age relatively slowly and grow its labor force between 2000 and 2050.
U.S. residents above 65 will make up 15 percent of the population in 2020 and 20 percent in 2050. By contrast, Japan’s senior population will make up more than 25 percent of its population in 2020 and almost 35 percent in 2050.
In the U.S., the labor force (ages 15-64) will rise 42 percent between 2000 and 2050. At the same time, Japan’s labor force will drop 44 percent. European countries and China will also see labor force drops by 2050.
Where will these productive young Americans live? According to Kotkin, the majority of Americans live in suburbs now and will continue to do so in the coming decades. While urbanites may scorn suburbs, 75 percent of population growth between 2000-08 was in suburbs, he said, and with incomes declining and coastal areas becoming more expensive, future homeowners will not be able to afford to buy in cities as previous generations did.
"People are saying, ‘If I lived in San Diego, if I lived in San Francisco, if I lived in Boston, I would never be able to buy a house.’ We got in, but this generation — for those who don’t have rich parents — how are they going to get in?" Kotkin said.
Generation Y or "Millennials" (roughly, those under 30 now) are as numerous as their baby boomer parents and in five or 10 years will reach their peak homebuying age.
While more of them live in big cities now compared to older generations (18 percent vs. 15 percent), their self-professed ideal living environment is suburban: 43 percent would prefer to live in suburbs, perhaps because many of them grew up there, Kotkin said.
By contrast, big cities, small cities and rural areas each got 17 percent of Millenials’ votes for the ideal place to live. For Kotkin, this preference for suburbs is a reminder for those in the real estate industry to keep in mind what will be important to their customers.
"We forget what customers want. We forget that someone who’s 25 years old and living in a dicey neighborhood in San Francisco — that that’s fine for them now, but may not be when they’re 35," he said.
Because they are generally more affordable than big cities, the suburbs offer a chance at homeownership for those who will be forming households in the future, Kotkin said. Better schools, better public safety, and a greater sense of community also make them more attractive, he said.
More important than housing opportunity, however, is that the suburbs offer jobs. Employment centers are now multi-polar, not concentrated in big cities, Kotkin said.
"The employment growth and the centers of employment are generally scattered throughout (metro areas). And every city in the U.S. is experiencing this — some more rapidly than others," he said.
Cities like San Francisco, New York, Boston, Los Angeles, Chicago and Detroit saw negative job growth between 2000-09 and low or negative population growth. Cities like Dallas and Houston saw gains in both.
"People are going to be moving to where there are jobs," he said.
While some community builders and planners are focusing their energy on revitalizing downtowns, they would do well to create more walkable, less dense town centers in suburbs that encourage a sense of community, Kotkin said.
According to Kotkin, during the boom too many developers built housing for markets they expected to materialize but didn’t. The newest developments and those furthest from jobs suffered most in the downturn — whether they were in outlying "exurbs" or condos in inner cities.
Years ago, affordability "was measured by how many years of income it would take to buy a house. That went out the window (in the housing boom)," Kotkin said. "We were building for this mythological empty-nester who was going to cash out.
"We built very expensive stuff for downtown Los Angeles when there was really a market for younger people. And we were building expensive housing in the suburbs for people whose incomes could not support it."
More "multi-ethnic-friendly" suburbs are likely to attract potential homeowners as suburbs are becoming more and more diverse. Immigrants and their children — who are expected to make up a significant chunk of the nation’s population growth between now and 2050 — are also moving to suburbs in droves, Kotkin said.
"Fundamentally, immigrants don’t come so they can live in a box in America," he said, talking about people moving out of ethnic enclaves as fast as they can. "The idea is, ‘How can I find that American dream?’ The desire for space is very, very strong in immigrants."
Immigrants are also driving growth in multigenerational households, Kotkin said.
"Immigrants are more family-oriented. They’re more likely to keep the kids in the house longer and they’re more likely to have grandparents living with them," he said.
Multi-generational, family-oriented development in the suburbs is also likely to draw Millennials and boomers. Boomers don’t want to move to condominiums in Florida, Kotkin said. They want to be near their grandchildren and stay in the communities they’ve been a part of for years — 70 percent of seniors are choosing to "age in place," Kotkin said.
In addition, Millennials’ relationship with their parents is different from previous generations. They prefer to live near them, he said.
"Boomers experienced conflict with their parents, but Millennials actually like their parents," Kotkin said.
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