As home prices start to rebound in many parts of the country that were hard-hit during the mortgage crisis and the Great Recession, small business owners including construction companies, realtors, home remodeling businesses and interior designers are holding their breath, hoping home sales continue on the upswing. But with the next generation of home-buyers—the Millennials—seemingly stalled in their careers due to a tough labor market, what will happen?
The Los Angeles Times recently took a closer look at the challenges of marketing home ownership to Millennials. Here are some of the issues:
Good news: There are 95 million people ages 10 to 32 (10 million more than the number of Baby Boomers). Bad news: These 95 million Millennials have responded to the recession by settling for less. Driven partly by the fact they lack the income to buy homes (or in many cases, even to move out of their parents’ homes), and partly by their desire to be environmentally friendly and less wasteful of natural resources, Millennials are more likely to be satisfied with smaller living spaces.
Bad news: Millennials are saddled with a lot of debt, particularly student loans among college graduates, making it difficult to save up down payments for homes, especially in expensive housing markets. As a result of their poor experiences with debt, in general Millennials are reluctant to incur more debt—even including mortgage debt. Many saw their parents’ homes lose value in the Recession and aren’t convinced of the worth of homes as investments. And Millennials are also more likely to want to live in urban settings, where housing prices are higher. Although the median debt of households headed by people under 35 declined nearly 30 percent between 2007 and 2010, that was primarily due to young people taking out fewer home and car loans.
So what will Millennials be looking for when they do look for homes?
- Value. In one survey, 75 percent say they want a home with just the “essentials” (although they do consider technology, such as high-speed Internet connections, to be “essential”).
- Fixer-uppers. In many markets, these will be the only homes within Millennials’ budgets; in addition, Millennials tend to enjoy doing things themselves and re-using existing materials rather than buying new.
What does this mean for small business owners in the home industry?
- There will be more opportunity in resale of existing homes rather than new home construction. Homes in neighborhoods just beginning to gentrify will appeal to Millennials, as will those in more urban neighborhoods.
- Millennials will also need help with their DIY projects. If your construction or remodeling company typically handles projects from start to finish, consider offering lower-end options for Millennials, such as using a draftsman rather than an architect to develop plans, leaving the “shell” unfinished for them to complete steps such as flooring, painting and cabinetry, or using reclaimed materials to remodel the space.
- Think high-tech. Many Millennials want home theaters, for example, even in their otherwise “basic” homes. Focus on projects such as turning old-fashioned homes tech-ready with new wiring, surround sound and in-room speakers.
Image by Flickr user highlandhomes (Creative Commons)