GENERATION Y Gregg Logan, Managing Director, RCLCO MARCH 2013 URBAN - PowerPoint PPT Presentation

IMPACT OF DEMOGRAPHIC TRENDS: GENERATION Y Gregg Logan, Managing Director, RCLCO MARCH 2013 URBAN LAND INSTITUTE

WHAT HAS THE GREATEST IMPACT ON REAL ESTATE CHOICES: ECONOMICS, PREFERENCES, OR LIFESTAGE OF THE ACTIVE MARKET GENERATIONS?  Post recession: “Everything has changed”! – Has it really? Has it really?  Many surveys completed on generational differences, attitudes, preferences – Like measuring the depth of a river at different places?  Do generations have fixed attitudes values  Do generations have fixed attitudes, values, and preferences or do they change based on life experiences? – Or buy what they can afford among the choices offered? 1 ULI March 2013

THE BIG DEMOGRAPHIC TRENDS IMPACTING REAL ESTATE  BIG shifts in U.S. population composition, driving demand patterns different from previous decades – Generational as well as changing ethnic and racial composition of the population • More Hispanic, Asian, and mixed-race, less Caucasian p , , , – Immigration, critical and yet not well understood – Economic impacts • Not merely workers coming for lowskilled job opportunities—highly advanced science, math, and biotech – Shrinking average household size • 82% of household growth will be singles and couples without children living at home 2 ULI March 2013

BIGGEST DEMOGRAPHIC CHANGES  Boomers, ages 49 – 67 • 1946 – 1964 – Biggest wave of population ever to move into “empty nester”, “pre-retiree”, and “retiree” life stages in history has begun  Gen Y, ages 13 – 31 • 1982 – 2000 – First wave of Boomer children moving into First wave of Boomer children moving into adulthood, becoming independent households • Impact on work spaces • Impact on work spaces • Impact on retail • Impacts on housing of all kinds 3 ULI March 2013

GEN Y: MILLIONS OF 22-YEAR OLDS BY YEAR WAVE OF GEN Y 4,200,000 4,100,000 4,100,000 4,000,000 3,900,000 3 800 000 3,800,000 3,700,000 3,600,000 3,500,000 3,400,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Number of 22-Year Olds NOTE: Number of 22-year olds is based upon birth rate and does not factor in death rates and migration. SOURCE: U.S. Centers for Disease Control and Prevention 4 ULI March 2013

GEN Y AND BABY BOOMERS: LARGEST MARKET SEGMENTS NATIONALLY, FLORIDA % of Florida % of Generation Generation Born Born Age Age Pop. Pop. Nation Nation Pop. Pop. Florida Florida Before Eisenhowers 64+ 41M 13% 3.4M 18% 1946 1946 – Baby Boomers 45 – 64 80M 26% 4.9M 26% 1964 1965 – Gen X Gen X 29 – 45 29 – 45 62M 62M 20% 20% 3 6M 3.6M 19% 19% 1980 Gen Y 1981 – 10 – 29 85M 27% 4.7M 25% (Millennials) 1999 2000 and Gen Z (?) 0 – 10 42M 14% 2.3M 12% After SOURCES: RCLCO, using Claritas; National Center for Health Statistics 5 ULI March 2013

ULI March 2013 Eisenhower Boomer United States GENERATIONS (IN MILLIONS) 6 Gen X Gen Y 90 90 80 70 60 60 50 40 30 30 20 10 0 (millions)

ULI March 2013 Eisenhower Boomer GENERATIONS (IN MILLIONS) Florida 7 Gen X Gen Y 6 6 5 4 4 3 2 2 1 0 (millions)

LIFESTAGE INFLUENCES REAL ESTATE DEMAND Empty Rent As Young Mature Buy Student Student Rental Rental Buy 2nd Buy 2nd Nester Nester Y Year Couple / C l / F Family il F Family il R ti Retire Housing Housing Home Downsize 1 st Home Own Own Home Own Gen X Eisen 2010 2010 Gen Y Gen Y Gen Y Gen Y Gen X Gen X Baby B Baby B Baby B Baby B Baby B Baby B Gen Y Baby B Gen X Baby B Baby B Eisen 2015 Gen Y Gen Y Gen Y Baby B Gen Y Gen X Gen X Baby B Gen Y Baby B Baby B 2020 Gen Y Gen Y Gen Y Gen X Gen Z Gen X Gen X Baby B Gen Y Gen Y Gen X Gen X Gen X 2025 Gen Z Gen Y Baby B Gen Z Gen Z Gen Y Gen Y Baby B 8 ULI March 2013

RECENT HOUSEHOLD GROWTH BY GENERATION Total Net Household Formation United States, 1995 – 2011 2,500,000 2,000,000 1,500,000 1 000 000 1,000,000 500,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -500,000 -1,000,000 -1,500,000 -2,000,000 Eisenhowers+ Baby Boomers Gen X Gen Y SOURCE: U.S. Census Current Population Survey 9 ULI March 2013

GEN Y’S RENTER PROPENSITY TODAY IS SIMILAR TO GEN X, WHEN THEY WERE AT THE SAME AGE Percent Renters by Generation United States, 1992 – 2011 1995: Oldest Gen X 30 – 71% Renters 2011: Oldest Gen Y 30 – 69% Renters Percent Renters 90% 90% 80% 70% 2000: Oldest Gen Y: 19, 1995: 1995: Gen X: 35, 2011: Oldest Gen Y: 14, 60% Boomers: 54 Oldest Gen Y: 30, Gen X: 30, Gen X: 46, Boomers: 49 50% Boomers: 65 40% 30% 20% 10% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Eisenhowers & Greatest Generation Baby Boomers y Gen X Gen Y U.S. Overall SOURCE: U.S. Census Current Population Survey 10 ULI March 2013

GEN Y HEADSHIP RATES ARE LOWER THAN GEN X AT THE SAME AGE Household Headship Rates by Generation 1995: Oldest Gen X 30 – 0.27 United States, 1992 – 2011 2011: Oldest Gen Y 30 – 0.22 Household Headship Rates 0 70 0.70 0.60 0 50 0.50 0.40 2011: Oldest Gen Y: 30, 0.30 2000: Gen X: 46 Gen X: 46, Oldest Gen Y: 19, Boomers: 65 Gen X: 35, 1995: Boomers: 54 0.20 Oldest Gen Y: 14, Gen X: 30, Boomers: 49 0.10 0.00 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Eisenhowers & Greatest Generation Baby Boomers Gen X Gen Y U.S. Overall SOURCE: U.S. Census Current Population Survey 11 ULI March 2013

GEN Y—LARGER CONCENTRATION OF NON- FAMILY HOUSEHOLDS AT SAME STAGE AS GEN X Distribution of Household Types by Generation United States 1995 – Oldest Gen X 30 2011 – Oldest Gen Y 30 100% 100% 90% 90% 80% 80% 70% 70% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 0% 0% Baby Gen X Gen Y U.S. Baby Gen X U.S. Overall Boomers Overall Boomers Married Family Unmarried Family Married Family Unmarried Family Non Family HH Non-Family HH Group Quarters Group Quarters Non Family HH Non-Family HH Group Quarters Group Quarters SOURCE: U.S. Census Current Population Survey 12 ULI March 2013

HISTORICAL CHANGE IN OWNER HOUSING STOCK 80,000 78,000 76,000 74,000 72,000 70,000 68,000 66,000 64,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Owner Units Occupied Owner Units 13 ULI March 2013

CHANGE IN OWNER HOUSING STOCK 2,000 1,500 , 1,000 500 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -500 -1,000 Change in Owner Units Change in Occ Owner Units 14 ULI March 2013

HISTORICAL CHANGE IN RENTAL HOUSING STOCK 50,000 45,000 40 000 40,000 35,000 30,000 25,000 20,000 15 000 15,000 10,000 5,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Renter Units Occupied Renter Units 15 ULI March 2013

CHANGE IN RENTAL HOUSING STOCK 1,200 1,000 800 600 400 200 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -200 -400 400 -600 Change in Rental Units Change in Occ Rental Units 16 ULI March 2013

HOUSING PRODUCTS AMERICANS LIVE IN NOW Distribution of Households by Product Type 2011 60% 3% 3% 13% 6% 14% 2010 61% 3% 3% 12% 6% 14% 2009 61% 3% 3% 12% 6% 14% 2008 62% 3% 3% 12% 6% 14% 2007 62% 3% 3% 11% 6% 14% 2006 63% 3% 3% 11% 6% 14% 2005 63% 3% 3% 11% 6% 14% 2004 63% 3% 3% 11% 6% 14% 2003 2003 63% 63% 3% 3% 3% 3% 11% 11% 6% 6% 15% 15% 2002 63% 2% 3% 11% 7% 14% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Owner SFD Owner 1-4 Units Attached Owner 5+ Units Attached Renter SFD Renter 1-4 Units Attached Renter 5 Units+ Attached 17 ULI March 2013

WHAT’S BEEN SAID ABOUT GEN Y: • Most digitally connected • High expectations of generation; smart phones, advancement, salary, , y, F Facebook, Twitter b k T itt mentoring – Knowledge is power and its • Switch jobs frequently, lack just a click away loyalty, OR loyalty OR • Delaying adulthood compared • Coming of age with great to other generations recession made frequent • Marrying later, kids later y g change necessary change necessary • Closer to their parents than • Want to live in urban Boomers were environments, desire • • Sense of entitlement, Sense of entitlement walkability lk bili narcissism, and rejection of social conventions • Less religious 18 ULI March 2013

IMPORTANT TO BE WEALTHY?  Percent High School Seniors and entering  Percent High School Seniors and entering College Freshman saying “being wealthy is very important to me”: is very important to me : –Baby Boomers: 45% –Generation X: 70% –Generation Y: 75% Generation Y: 75% SOURCES: University of Michigan Monitoring the Future; American Freshman Survey; UCLA 19 ULI March 2013