Another wave of change is anticipated in the next decade or even less. That’s when members of Generation Z—those born on the heels of millennials—will become first time homeowners. Experts say they’ll help transform areas that are sandwiched between major cities and suburbs into districts with an urban feel and amenities, without the hefty price tags major metros demand.
That transformation is already starting to happen. “Many of our ‘suburbs’ are actually neighborhoods in Atlanta, particularly Decatur and Roswell,” said Keith Knutsson, Managing Director of Integrale Advisors, a real estate advisory company. “In the outlining bedroom communities have now actually been absorbed into Atlanta and are viewed as mini ‘cores’ Dunwoody, Roswell, Decatur, now have office towers, good restaurants and night-life businesses creating their own city areas.”
It’s no surprise that the younger generation needs to find an alternative to the sky-high costs of urban living. The Economic Policy Institute noted in 2016 that folks who live in San Francisco face a cost of living that's 52.9 percent above the national average. For New Yorkers, living costs were 49.4 percent higher. The country's least-affordable place to live was Washington D.C., where residents faced costs 63.5 percent higher than the national average. These trends are seen in major metro poles and across the counties second tiered cities.
Cost, conveniences, green space and proximity to work are top of mind for younger buyers, whose demands will continue to influence the evolution of housing in the coming years ahead. In addition to having a hand in the development of an array of new, more urban-centric bedroom communities, Generation Z is expected to help usher in both new types of housing stock and new features in the kinds of homes built over the next decade. That’s likely to include co-living spaces, especially in cities where demand for rentals has caused prices to rise, and an emphasis on “connected amenities” and hyper-green homes. Urban farming, solar power and outdoor community centers will step onto the housing landscape.
Because of their technological prowess and comfort with the sharing economy Generation Z is expected to usher in a host of changes that will affect how homes are bought and sold, as well as how developers design spaces for who lives in them. Today new apps help home buyers price and sell homes with confidence with reliance on technology providing up to the minute market data.
Much has been made of “walkable neighborhoods,” or those that offer residents grocery stores, banks and dry cleaning, as well as bars, restaurants and green spaces just steps from their residences. Also called “new urbanism,” it is a trend that is expected to flourish as members of Generation Z become homeowners.
These neighborhoods rely upon convenience—for the right homeowners, it’s preferable to walk a few blocks to the grocery store or grab a rideshare service than to pull the car from the garage, wait at a few traffic lights then hunt for parking.
This desire for convenience is expected to play out in the way Generation Z homes are built in the next decade, said Stephen C. Moore, senior partner at BSB Design, a Des Moines, Iowa-based architecture firm.
“Why do you need a 22 cubic-foot refrigerator/freezer when you are ordering everything in?” he asked. “The oven of the future is not going to be the same as the ovens in the past. Just-in-time delivery of food is going to be the norm in 10 years so you don’t have to buy two weeks’ worth of stuff and store it. It changes everything in the case of design.”
Instead of two-car garages, Moore joked that the home of the future will have a drone landing pad for airborne deliveries. That may be far off, but uber-smart homes with technology likely to appeal to digital-first members of Generation Z are not. While properties with features that can be controlled by a smart phone or tablet, such as heating and cooling, are available today, tomorrow’s homes might feature appliances that read and react to our biometric data, for example, such as an air-conditioner that can sense when one is hot and automatically turn on.
In addition to being comfortable with this kind of technology, members of Generation Z also tend to value the experiential instead of the tangible, with 62 percent of Americans aged 14 to 19 surveyed in 2016 reporting a desire for experiences over material items.
The rise in ride sharing, home rentals and the 'gig economy' “show that these people are less attached to ‘things’ than experiences,” said Bob Tankel, a real estate attorney and owner of Tankel Law Group in Dunedin, Fla.
In response to these trends, Tankel expects a “different type of occupancy to be developed”—one that will expand on the communal space trend already cropping up in some of the nation’s cities. For example, one shared space real estate developer offers “flexible, community-driven housing” in Brooklyn, San Francisco and Washington, D.C. Its renters have their own bedrooms, but share living space such as a kitchen, bathroom and den, in-unit washers and dryers and in some buildings, gyms and rooftop facilities.
Another form of “co-living”—multigenerational homes in which parents live with their young adult children—are on the rise and expected to continue to grow once Generation Z graduates from college.
“Since the financial crisis there has been an increase in multigenerational households, driven in large part by financial limitations and insecurity as well as by marital status and educational attainment,” said David Reiss, professor of law and research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “Young adults are more likely to live at their parent’s home in recent years than they have been for more than a century."
A study released in March by the National Association of REALTORS® found that high rents are driving some middle-aged parents to purchase a home with their young adult kids in mind. Twenty percent of these so-called younger boomers were most likely to buy a multi-generational home, up from 6 percent in 2016. Thirty percent said the biggest factor in doing so was that children aged 18 and older had moved in with them or never left; that’s up from 27 percent in 2016.
For those young people hoping to one day to buy their own home, an affinity for protecting the environment also defines Generation Z, and will influence their housing choices. In a recent Nielsen survey, 72 percent of respondents aged 15 to 20 said they’d be willing to pay more for products or services from companies committed to positive social and environmental impact.
Richard Pedranti, an architect in Milford, Pa. who specializes in energy-efficient buildings, sees this worldview playing out in the types of homes built in the next decade. Called “passive” homes, many are expected to be oriented around solar power, provide filtered fresh air and be “super-insulated,” characteristics that are expected to play into Generation Z’s desire to live green.
“While ‘passive house’ is the building standard in many European countries,” he said, “it is only starting to gain momentum in the United States.”
The changing desires and distinct behaviors of Generation Z will also impact the way they work with a real estate professional, with speed and digital communication driving much of the conversation. In essence, the best way to reach them will be on their terms.
“We'll see more and more digital avenues, including smarter videos and routine Skype-type conversations, to connect with new clients and to stay connected with past clients,” Bishop said. “We'll need to respond faster to an inquiry and be on our toes with pertinent info because our client has access to much of that info too. That's happening today in LA, New York and other major cities.
“In the smaller cities and rural areas,” she continued, “these new clients will want speed and mobility, and they'll demand it.”
Just as millennials have been influencing developers and real estate agents to adapt to this generation’s demand for walkable neighborhoods and urban conveniences, the housing market will continue to evolve at an even more dramatic pace as Gen Z comes of age—from home design to how neighborhoods are developed to more choices of multi-generational housing.