The younger generation, or "Millennials" as some call them, have been forced to move back in with their parents or enter into multi-party lease arrangements to save money while job opportunities remain extremely competitive.
Household formation among this generation remains stalled while the economy languishes.
However, as soon as the employment situation improves, new household formation from this group will bounce back. Due to new lending requirements and the need for larger down payments, we can expect this generation to move into renting situations prior to making a commitment to home ownership. When they do decide to purchase a home, the market will have to be ready with a large number of smaller homes with fewer amenities, built to green standards at entry-level prices.
Data also suggests that the Millennials prefer urban settings – a market that may be closed to a large portion of this group due to high per-square-foot costs, which might compel them to move to more-affordable outer-ring suburbs.
However, developers may have a unique opportunity to provide this generation with walkable communities. Integrated small-scale commercial uses or town center type developments may satisfy the desire of Millenials to have amenities nearby. We will likely see local governments move away from a zoning regime that requires the strict separation of uses to performance-based zoning that provides the opportunity for integrated uses within a development.
Like the Millennials, the Baby Boomer generation will also want smaller housing units. Many Boomers today live in large homes – one of the last vestiges of this generation's ethos that a family required more space than that of their parents. But as their families have grown-up and moved out, the need for the larger home has diminished. Those Boomers that were able to sell their homes prior to the collapse of the real estate market would have likely downsized. However, those that didn't sell prior to the recession may be forced to stay in those homes until they feel their equity returns.
Unlike many Millennials, when the Boomers are able to sell their home, they will have the capability to move to an urban setting, either in a city or in an urbanized suburban town center. Here they will enjoy the walkable mixed-use environment that the Millennials desire.
And while the condo market seems oversaturated right now, developers and builders should eventually return to it in order to meet the oncoming demand from the Boomers, who will have greater flexibility to move toward urban centers and to the suburban communities that have developed town centers.
A version of this column appeared in a recent edition of Miller Nash's Groundbreaking News. Howsley is an attorney in the Vancouver office of Miller Nash LLP. He can be reached at James.Howsley@MillerNash.com.
