The baby boomers have made custom builders’ lives easy. By entering the world in such great numbers and then pros-Tpering beyond their wildest dreams, they’ve grown into a ready-made market for luxury housing. Their desire for an upscale lifestyle has spawned entire product lines and industries that simply didn’t exist during the “Greatest Generation” years. And the media never tires of chronicling the effect boomers continue to have on cultural and social trends. Even without all the hype, though, the mentality of those born in the United States between 1946 and 1964 would be no secret to custom builders—the majority of them are baby boomers themselves.
But this fabled, 78.3-million-strong generation isn’t the only custom home market around. Generations X and Y are hot on their heels, and combined they number 124.6 million, over one and a half times the size of the baby boomers. In addition, immigration is positively affecting all segments of the housing market, including the high end. According to a Fannie Mae Foundation Census Note published in October 2002 by demographer John Pitkin, immigrants accounted for one-fifth of all new homeowners nationwide during the 1990s. Builders who ignore these powerful demographic groups risk missing the opportunity to tap into markets that could sustain them through dry spells and inject new life and staying power into their businesses.
These markets aren’t always obvious—that’s the beauty of them. A builder who learns to address their needs will have the edge over competitors who only have eyes for the baby boomers. Take Generation Y (born between 1980 and 1995), also known as the echo boomers. More than 65 million Yers exist, and, though the oldest are only 23 years old, their sheer numbers represent massive potential to purveyors of any luxury product. “Gen-Y is the single most important demographic factor,” says M. Leanne Lachman, a principal at Lend Lease Real Estate Investments in New York City. “They’ll drive markets in the same way the baby boom has. That’s what’s really exciting in terms of future demand.”
Generation X (born between 1965 and 1979) is a slightly smaller bunch, at 59.3 million. But with its oldest members turning 38 this year, this cohort has hit its peak home-buying years. In fact, a 2000 survey by BUILDER, CUSTOM HOME’s sister magazine, shows that half of Gen-Xers have already bought their first homes. Like their younger Gen-Y siblings, they’ve led privileged lives and are likely to want to move up in home quality and price point as quickly as they can. Since both partners of most Gen-X couples work, and since they’re not having children as early or as often as their parents did, they’re able to save for down payments while they’re still in their 20s. And it’s becoming more and more common for well-off parents to supply their children with a down payment, a trend that will only intensify as the echo boomers come of age.
The economy over the past two years hasn’t been kind to either generation, but experts believe the technology sector, a major source of Gen-X and -Y jobs, will bounce back. “Our view is that tech will eventually recover,” says Scott Hoyt, an economist with the respected Westchester, Pa.–based research firm Economy.com. While the prognosis is that the tech recovery won’t happen until late this year at the earliest, that’s still in plenty of time for younger home buyers to resume building their assets. “Gen-X will definitely be buying custom homes,” says Sandra Kulli, a home-building marketing consultant in Malibu, Calif. Lachman thinks the same of Gen-Y. “They’ve been pretty pampered,” she says. “They’re going to want nicer homes.” Michael Wood, vice president of research at Teenage Research Unlimited, a Northbrook, Ill.–based firm that tracks adolescent consumer preferences, points out another promising Gen-Y factor. “They’re just so into customization, everything from jeans to backpacks to cars,” he says. “I would think that that would carry over as they get older and buy homes.”
Naturally, Generations X and Y prioritize home features differently than the baby boomers do. Any builder who plans to land even one younger-than-the-boomers client should know the basics about home technology options, or have a subcontractor who does. Both BUILDER’s Gen-X survey and Owens Corning’s 2000 survey on Gen-Xers and -Yers, “House/Works: The Next Generation of American Homeowners,” turned up overwhelming evidence that younger buyers crave high-speed home Internet access. A 2002 report by the Pew Internet and American Life Project, “The Internet Goes to College: How Students Are Living in the Future with Today’s Technology,” also indicates the extent to which future home buyers will take high-speed connections for granted. “Many college students have learned to live in an environment where they expect to be in touch with others throughout the day, to never be far from Internet access. … They carry those expectations with them after graduation,” says the study’s summary. High-speed Internet access already serves as a primary conduit for downloading music among the under-30 crowd, and downloadable movies are gaining in popularity as well. “Technology and entertainment are elements of great importance to today’s teenagers,” Wood says.
