Buyers want smaller homes and urban life

The two largest groups of Americans, Gen Y and the baby boomers, both favor urban living. That, plus new economic realities, will change the future of real estate, a report says.

By Teresa at MSN Real Estate Mar 28, 2012 1:05PM

People walking down a city street in Florida (© Ilene MacDonald/Alamy)A conference last week in Dallas provided yet another piece of evidence that the real-estate market of the future is not going to be like the market of the past.

 

Putting another nail in the coffin of far-flung suburbs, the Urban Land Institute, drawing from a recent report, provided yet more evidence that future homebuyers will want something different.

 

The new homebuyer wants a smaller home in an urban area, as well as a shorter commute to work and smaller payments.

 

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"This is not just another real-estate cycle but a fundamental change," Maureen McAvey, executive vice president of policy and practice for the institute, told an audience in Oregon earlier this month.

Her talks in Dallas and in Portland, Ore., were based on the institute's report titled "What's Next? Real Estate in the New Economy," which the organization released last fall.

Here are some of the highlights:

  • Rising commuting costs, both in money and in time, are increasing Americans' desires to live near restaurants, shops and services. That is especially true of the two largest groups: Generation Y and the baby boomers.
  • Gen Y prefers a more urban environment and is willing to sacrifice space for a better location. Plus, lower incomes mean they need to find homes at lower rents and lower mortgage payments.
  • Demand for larger homes and apartments will come from intergenerational families, as aging boomers are forced to live with their children or adult children are forced to continue living with parents. Friends and acquaintances also may chose communal living arrangements in larger spaces to save money. 
  • More people over 65 will choose to age in place or be forced to move in with relatives. Many of those who are free to move, like their Gen Y counterparts, favor smaller spaces in urban areas.
  • More Americans will rent, either by choice or by necessity.

"Markets become ever more segmented and specialized — one size certainly no longer fits all," the report says in its conclusion. 

"Housing demands diverge among splintering household types. Expanding cohorts like intergenerational families, single women living alone, Gen Y couples and boomer empty-nesters all pursue different lifestyles, while traditional nuclear families seem ever less dominant."

 
36Comments
Aug 11, 2012 7:39PM
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My wife and I are in our 40s and we live completely debt free.  We own our house and cars outright. 1600 sq ft brick ranch, we clear less than $50,000 a year combined income. I learned my finances from my grandmother. She bought her first house during the depression and she had a saying. “I pay cash or I don't have it and mostly I don't have it ".  Her house was even smaller than mine, she had a 2 bedroom house with 1 bath and she lived in that house until she passed in 1982.  Live within your means or below your means.  When you have a mortgage you are just renting your house from the bank.  Work toward getting your house paid off as soon as possible. Consider buying a used car instead of new.  Try never to use a credit card unless you can pay it off monthly.  You should not borrow on the equity of your house. Houses were not meant to be piggy banks.

Aug 11, 2012 3:16PM
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My husband and I  live in a 1700 sq. ft. home. We are both retired. It has three small bedrooms with one and a half baths. It is lake front property and we live about 20 minutes from a river. One of our adult sons lives with us because he doesn't make enough money to have his own place.  He gets to see his daughter three weekends a month.  During the summer months, it gets crowded due to visiting grandchildren and our other grown up kids.  I'm tired of the smallness and the crowding- sometimes I feel like I cannot turn around.  Would love to find a little bit bigger place.
Aug 11, 2012 1:33PM
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Downsizing from 2200 sq ft to 285 sq ft. Going mobile and low cost. This economy has sucked enough out of me. But I won't be defeated by it.
Aug 11, 2012 1:09PM
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     GO VEGAS YOUNG MAN, GO VEGAS.
Aug 11, 2012 12:25PM
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Just happened to come back to this article and read many blogs. As I said in my previous blog it is NEEDS, WANTS and DESIRES. There were seven thumbs down on my blog. OK you either don't agree with what my wife and I did, you couldn't afford to do what we did, or your jealous.  As I said I read the other blogs and commend everyone for doing what you did to fulfill your needs, wants and desires. Bringing up four kids was not cheap however we stretched our incomes, made great investments, were heavily involved with kids sports and the school systems as well as always volunteering our time for our kids and many other kids. We took very few vacations because our kids were more important than any vacation. Lastly, our home was thirty years old and ready for a complete modernization. Thankfully, we had a builder who simply said we can expand your present home and it will be half new and half old or for about a hundred thousand more than remodel we will build it brand new. We ended up with a new 2009 and not a remodeled 1979. As for the comment of putting any kind of home on any lot, that is what used to be the rule however our home, color and dimensions had to be approved by our HOA before we could even apply for building permits. We are in an older neighborhood that is pristine and we want it to stay that way.
Aug 11, 2012 12:19PM
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I would rather have a smaller home with great plumbing, sturdy frame ,sturdy roof great insulation and a decent crawl space than have granite or marble countertops.It is amazing to me what people put there money towards when they buy a home. If the structure isn't good than who cares about a granite countertop or stainlesssteel appliances?
Aug 11, 2012 12:13PM
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Junk again / very few want smaller homes than their parents have.Some retires want more compact homes to cut down on work on their property,and someplace the price per square foot is way high and they can't afford it.If we all moved around more we could find better housing at cheaper prices.
Aug 11, 2012 11:48AM
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I've been looking for a 1200-1400 2 bed 2 bath retirement home for the longest while. Seems like you can only find them in FL. Not sure why they are not built more widely in the US.
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I'm hoping these same forces will finally bring some sanity to the housing market and make it free. People should be free to live in a home of their own choosing. I had a job for 22 yrs in Farmington Hills, MI (near Detroit). But for 18 yrs I lived in a mobile home park because the city said your home had to be 24 ft wide and conform to existing housing. When I lost my job at 59 in Oct 2008 I just retired (did not even apply for unemployment) and moved my singlewide to a quarter acre lot at Rocky Fork Lake about 55 miles east of Cincinnati. Now I'm paying $662/yr in property taxes compared to the $3,720/yr I was paying in lot rent to the mobile home park. My nephew is a lawyer in Atlanta. In order to afford his home he rents out the downstairs and lives upstairs. I rented a 300 sq ft apartment in a home in Ypsilanti, MI for 13 yrs. There were 8 small apartments cared out of this single house on W Cross St at Normal St near the water tower near Eastern MI U's campus. It sure is nice to have your own space. It would've been nice to get a small singlewide right out of high school and to have been able to live in that almost anywhere in the country. Isn't it time we finally ended exclusionary zoning so people can buy a residential lot and place any home they choose on that lot?
Aug 11, 2012 9:39AM
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Don't worry, Fannie and Frieddy just said things are getting better, haha!. Housing still needs to drop at least 20% to line up with wages.

Aug 11, 2012 9:35AM
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It is time for builders to build condos/townhouses that are in the $90,000 to $100,000 price range which equals smaller spaces without all the tennis courts, pools & extras that add to cost & higher HOA fees. Build condos for the average or lower mid income!!!!!!!!!!!!!!!

 

Aug 11, 2012 8:57AM
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Needs, wants and desires!!! One size does not fit all. We brought up four kids in a three bedroom home with thankfully two baths. Two boys and two girls. We have a big family and tons of friends who came to visit very sparingly because we did not have the room. We finally agreed to expand our home. Working with a wonderful contractor/home builder we stopped thinking remodel when the price exceeded four hundred thousand. We decided to tear down and build a new four thousand square foot six bedroom home on the same property. Tear down to move back in was five months. Two months ahead of schedule and a hundred and twenty thousand under budget. We have an interest only mortgage that is seventeen hundred a month and real estate taxes of forty five hundred a year. We are retired and have company visit all the time. For us it was the right choice, very affordable and life style has changed for the better.
Aug 11, 2012 8:33AM
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The American consumer may finally be waking up from the "dream."  Some of us lived in reality thoughout the housing bubble, while many were swayed by the hot air real estate agents and banks blew up their a$$es.  I never came close to losing my house during the recession.  It's paid for and has been for years.  When we wanted a bigger house, we saved and put on an addition.  It's not finished yet, but it's paid for.  As we save the money to continue, we improve the house.  We can afford the added utilities for the extra space because we pay no interest.  Instant gratification has a price tag and we weren't willing to pay it.  Now we are reaping the benefits.
Aug 11, 2012 5:24AM
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2400 to 1200 sq feet could cut your heating, cooling and maintenance bills in half plus lower payments. More money for other things. It sounds good zipping across country in a van but food expenses, break downs and staying clean could end up a nightmare. Some people need a warm, cozy home and others do not.
Aug 11, 2012 3:37AM
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I got rid of my morgage last year from chapter 7. My future home is a 1976 Dodge B200 van. I am going to take the money I have saved and travel across the USA  while I am young enough (35) to enjoy it.

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