Most of the anecdotal feedback we have received is that homeownership will go even lower than we forecast unless there is a massive shift in society
By JOHN BURNS
We have learned a lot in the last 12 months. After giving three presentations at ULI, Chris Porter and I will have presented our findings 71 times since publishing our book Big Shifts Ahead one year ago. Here are just a few trends we have identified thanks to readers and attendees at our presentations:
People are increasingly living with strangers. Inspired by Airbnb, numerous homeowners have told me they are bringing in unrelated housemates as a source of income, and not just for short-term stays. Homeowners and renters are meeting online. Mature homeowners need the income (and perhaps even the companionship and help running errands), and young adults need lower rent (and perhaps even after-school care if they have a child). While this is a great market-based solution to an affordable housing problem, it has slowed household formations. We are now studying the Census Bureau’s “boarder” stats even more carefully.
People are increasingly renting. We created a lot of controversy among home building and building product CEOs when we forecast that the homeownership rate will fall to 60.8 percent by 2025. Interestingly, most of the anecdotal feedback we have received is that homeownership will go even lower than we forecast unless there is a massive shift in society, possibly induced by creative low down payment lending programs. Many people have shared that they have already sold their home and become renters because they 1) need the cash, 2) don’t use the mortgage interest deduction anymore, and 3) want to try living in another environment.
New homes being built for rent. While we knew more and more people were renting homes, we didn’t think it was financially feasible to build new homes and rent them out. However, several companies have now done so and have shared that the yields in some markets are excellent. These builders and operators tend to have a long-term view toward building a steady, asset-backed cash flow stream.
Autonomous driving will change land planning as well as assisted living demand. The response to our autonomous car blog has been overwhelming, and the topic seems to come up in every Q&A session. While fully autonomous driving seems many years away, planners and developers are already rethinking how new development needs to be planned with autonomous driving in mind. The percentage of people aged 20 to 24 with driver’s licenses has already fallen from 93 percent to 78 percent. Wow! Several people have pointed out that assisted living facilities will grow less than people think if the elderly can use ride-sharing from home after losing their driver’s license.
Experiences are the new brag. Possessions including houses and cars have historically been a status symbol. Today’s status symbol seems to have shifted toward experiences. Today’s “brag” is to show what you are doing on social media. The best house is more likely to be near great things to do rather than a large home with a large yard. This shift may best be represented by the attention given to a home’s walkability score. Several also pointed out their belief that the experience economy is behind the recent rise in divorce rates among those over 50 who want new experiences.
Immigration is a real hot button issue. Suffice it to say that I can really tell whether I am presenting in a “red” or “blue” state when I share historical immigration data. One slide I present elicits wildly different responses depending on the state. I can’t imagine how difficult it must be to set policy these days.
Impact of rising female education is still a mystery. Perhaps my biggest surprise is the lack of response regarding the tremendous shift in education, with women earning 58 percent of college degrees today compared to only 42 percent of degrees when Title IX was passed in 1972. Both men and women have a difficult time making sense of how this will change society. I have some theories, but very little statistical evidence. There is more work to be done here.
9/11 was 16 years ago. We have been presenting how many of the baby boomer trends (such as the percentage of stay-at-home parents) clearly reversed around 2001. In doing so, I have been stunned by how many young decision- makers can’t relate to the social shifts that occurred after 9/11. I have to remind myself that it has been 16 years, and many of them were just kids at the time.
Frustrated senior executives. Experienced executives seem frustrated with the lack of growth in their own business, while younger management sees today’s growth as normal, and they are anxious to use technology to improve the business. Increasingly, I am finding that executives born before the 1970s don’t want to change, and those born after 1980 are excited to change.
Surban™ is a word. This might be the best news. We trademarked the term surban, allowing people to use the term without mentioning us, and it is starting to be recognized as a word! The urban dictionary as well as at least five podcasts and publications such as the Washington Post and the Orange County Register have referred to high-quality, high-density housing near suburban downtowns as surban!
John Burns is the CEO and founder of John Burns Real Estate Consulting. Hey may be reached at firstname.lastname@example.org or at 949-870-1200.