Getting an audience excited about data and statistics isn’t easy. Just ask any of your college professors, who probably are still trying to figure out a way to wake up snoozing twenty-somethings as they lecture about populations, standard deviation and exponential growth factors.
But facing a (significantly) more engaged audience earlier this month at RISMedia’s CEO & Leadership Exchange, Bright MLS chief economist Dr. Lisa Sturtevant had a couple hundred brokers at the edge of their seats. Though Sturtevant certainly brought a lot more energy than most math teachers bring to their lecture halls, there was another reason why brokers and real estate CEOs were hanging on her words:
“Demographics are really at the heart of where the housing market is headed,” Sturtevant said.
In a talk and Q&A session aptly titled, “Demographics Are Destiny,” Sturtevant broke down how it is populations of people and their behaviors that are going to dictate the long and medium-term direction of real estate—much more than any political, economic or regulatory factor.
And while looking at many of these other issues recently has painted a less than rosy picture of real estate’s future, the good news is that population and demographic data are projecting a great decade or so for housing.
“Very strong, favorable demographics really underlie the housing market, and really will for the next seven to eight years,” Sturtevant promised.
While consumers are currently being bombarded with headlines about falling home prices, many others have plenty of traumatic memories of the housing bubble. But Sturtevant urged any broker or real estate professional to remind clients that housing is a streadier, and still much safer long-term investment, with specific factors that point toward an even more vibrant market through 2030 at least.
In a nutshell, the reason for this is what Sturtevant jokingly called the “M-word—” Millennials, whose prime home buying—and selling—years are just peaking.
“There’s 72 million folks in the millennial cohort, now they are age 35 to 50,” she said. “We still have a big population in their mid 30s, we still have folks in their 40s moving into 50—that’s when you do your move-up buying. This demographic is going to be with us for the rest of the decade, they’re going to be in the market. We can’t forget that.”
Sturtevant acknowledged that student debt—a much bigger problem for millennials than it was for any other generation—could weigh on this demographic. But she also dispelled the myth that millennials are not interested in homeownership, or more likely to be life-long renters.
“They have a little bit of PTSD from the Great Recession where maybe they saw their parents lose their home or a friend lose a home…they’re a little gun-shy. Perfect opportunity for education,” she said. “But there is significant pent-up demand for homeownership.”
Maybe the biggest thing standing in the way of a golden decade for real estate is another generation, which benefited from an economic boom and a very affordable housing market 40 or 50 years ago.
“Boomers are in charge of supply, and they will be for the rest of the decade. They have been in charge of inventory for a long time,” she explained. “Older folks want to stay in their homes.”
Staying in their homes longer, with many locked into low mortgage rates, Sturtevant warned that Boomers are going to prove a significant challenge to opening up more housing stock, as most experts agree that new constructions are not going to make up for an inventory shortage that has been ballooning since 2009.
There are some reasons to be optimistic that Boomers can be convinced to move. Sturetvenat said she oversaw a study of the state of Virginia that found that 40% of folks age 60 or older were living in a home that was too big for their family—amounting to 200,000 homes. Boomers are also going to need accessibility features—things like wide doorways, ramps, grab bars and technology like voice activated lights, which are often hard to find—if they want to age in place.
“82 is the new 70 now,” Sturtevant quipped.
But having a good number of Boomers sticking around in their homes will keep supply from getting out of control like it did in the early 2000s, which is a good thing for anyone who buys now or soon, as their home values will continue to rise with the strong demand and limited inventory.
“Some of the Boomers will obviously age out of their existing home and freeing up those homes for buyers, ”Sturtevant noted,” but the fact of the matter is, we are in a five to seven to eight year trend of low inventory and strong demand—I just can’t see any reason why that wouldn’t be the case.”
RISMedia CEO and founder John Featherston played off that tension between Boomers and younger generations in the Q&A portion of the talk, asking Sturtevant if, “Keeping up with the Kardashians” was comparable to the Johnny Carson Show or Gilligan, and if Boomers and Millennials maybe had more in common than they thought.
“In so many ways, yes, we are finding that Millennials are very similar to Boomers, to Gen-Xers in terms of the things that we do, the milestones that we hit—maybe surprising, we didn’t really expect it,” Sturtevant explained.
But that tension does exist, Sturtevant added. Younger families with kids have every reason to be frustrated that towns with great school districts are full of older empty-nesters who don’t want to sell. For real estate professionals, that becomes a practical obstacle to overcome—identifying what factors will motivate older homeowners to sell, and what sub-demographics are willing to downsize or change their lifestyle. Sturetevant again mentioned accessibility as something that will play a factor, as well as ADUs, which have increasingly become an important avenue for adding more housing in many regions.
Millennials, for their part, are moving to suburbs and looking for single-family homes with space for the most part—similar to previous generations, meaning they are looking at the same housing stock Boomers currently control. Millennials are slightly more likely to be flexible, though, Sturtevant noted, due to remote work and might be persuaded to look at a wider variety of towns or regions.
It is up to real estate agents and brokers—as always—to research, understand and navigate these shifting demographics in order to take advantage of what has the potential to be an incredibly active market over the next decade. Sturtevant noted that Millennials are even more likely to work with a real estate agent compared to previous generations.
“I think this has to be this sort of creativity in a way that there hasn’t, because we are not going to build enough housing in the near term to meet the demand, but we are going to have to be creative,” she said.
Stay tuned to RISMedia for additional coverage of this year’s CEO & Leadership Exchange.