For decades, Baby Boomers have dominated the demographic landscape and turned a variety of markets, including real estate, upside down. Well, move over, Boomers. The Millennials are about to seize the spotlight.
Millennials, The Millennium Generation, Gen Y, Echo Boomers. Known by a variety of monikers, these folks follow Gen X on the demographic charts and are largely the offspring of Baby Boomers.
Born between 1977 and 1994 (though experts vary on specific years), Millennials are about 70 million strong and rival the 76 million Boomers born between 1946 and 1964.
From a percentage standpoint, Millennials won’t have as much impact as Boomers, because total population has grown. Their strength in numbers, however, still gives Millennials considerable clout and marketers are already paying attention.
“Everyone is looking for the big pond, and the echo boom is a pretty big pond,” says Susan Mitchell, demographer and author of “American Generations” (New Strategist Publications, 1998).
Each generation has different attitudes and emotional cues that affect consumer behavior, say marketing gurus. If you want to attract the attention of a particular group, then you’d better know what makes them tick.
Perhaps the greatest hallmark of the Millennium Generation is its comfort with technology. Although Generation Xers are computer savvy, Millennials are technologically precocious, growing up with a rattle in one hand and a mouse in the other.
Millennials are also very independent, population pundits agree. Raised in dual-income households, Millennials are used to fending for themselves: Studies show that many do their own shopping and prepare their own meals.
Born in an era of rapid change, Millennials are highly adaptable and have an upbeat, albeit pragmatic outlook on life.
“They are not the victims of disappointed expectations the way Generation Xers are,” says Mitchell. Gen Xers, who grew up in the ’80s, thought they would graduate from college and step into six-figure salaries.
“That didn’t happen–by a long shot,” says Mitchell. In contrast, Millennials have more realistic expectations.
Having watched their parents go through corporate downsizing and layoffs, Millennials are wary of large organizations. They expect to change jobs frequently and rely on themselves to advance their careers. Look for lots of entrepreneurs.
Many expect Millennials to be less materialistic.
“I don’t think they will have avarice for things that their parents have,” says Kathleen Cecilian, head of KC Associates, a real estate consulting firm in Richmond, Va.
Cecilian predicts that Millennials will be about the “pursuit of less,” which has nothing to do with being a slacker.
“It’s about not living the life of a hamster,” explains Cecilian. “Many of these kids have lived a life in chaos–rushed from day care to home for a fast-food meal. Time is the amenity of the next century.”
Indeed, the overall perception of Millennials is exceedingly positive. Deemed “team players,” Millennials are thought to possess both social confidence and social conscience.
“Thanks to the controlling hand of their Boomer parents, they appear to be straight arrows,” says Cheryl Russell, a demographer and author of “Americans and Their Homes” (New Strategist Publications, 1998).
“I’m very optimistic,” says J. Carson Looney, a principal at Looney Ricks Kiss Architects in Memphis. Several Millennials work at his firm as interns and Looney observes that they are the ones who work late without complaint.
With Gen Xers, there was an air of entitlement, says Looney: “Their whole attitude was, `What are you going to do for me?’ “
So how will Millennials influence housing markets? Forecasting home-buying behavior of a particular generation is trickier than talking about its general profile, experts caution. So much depends on future economics and interest rates.
What’s more, it’s tough to get an accurate picture of consumption patterns until individuals are out in the world and truly on their own. (Right now, the oldest Millennial is only about 21.)
Handicaps duly noted, futurists agreed to peer ahead.
“Millennials will want to buy a home as soon as they can, but won’t be able to afford it,” says Gerald Celente, author of “Trends 2000,” (Warner Books, 1997), citing declining real wages.
Other contributing factors: Destined to be a highly educated group, Millennials will take longer to enter the work force. And unlike Boomers who were at odds with their parents on a gamut of issues, there’s a blend of beliefs between Boomer parents and their Millennial offspring.
“Differences are differences of age rather than issues,” says Celente. This makes Millennials less likely to leave the nest. In fact, they may linger longer than Mom and Pop would prefer.
Competition from the apartment sector might also postpone home buying. Exercise clubs, business centers, biking and jogging paths have become common amenities in the rental arena.
Yet home-buying might be accelerated if parents of Millennials lend a helping hand.
“Boomers drove up (housing) prices. The parents of Boomers benefited from that–and that wealth will go to Boomers,” observes Russell.
Affluent Boomers may not even wait until their Millennial children are out of school; they may purchase condos for collegiates, seeing them as a better investment than dorm room fees or apartment rents, adds Russell.
Where will Millennials eventually gravitate? Most experts are betting on urban locations, especially markets in the South and West where job growth continues to be strong.
A diverse group themselves, Millennials are used to ethnic and cultural diversity, which makes them “less likely to escape to the suburban environment and the safety net that environment gave previous generations,” says Tracy Cross, a Schaumburg-based real estate consultant.
Although Millennials might follow traditional migration patterns and move out from cities once they have children, the catalyst will be schools, not segregation.
When it comes to spatial preferences, “unique” is the operative word. Millennials will eschew cookie-cutter developments and seek places where they can stamp their personality.
Open, flowing spaces are appealing, partly because Millennials were raised in great rooms and partly because they are social animals.
Outdoors-oriented and environmentally aware, Millennials will appreciate an environment that helps them connect with nature.
“They do a lot of work in cubicles. Anything that brings the outdoors inside, the happier they are,” says Celente, ticking off windows and proximity to water or woods as hot buttons.
Because cost of space is not likely to decrease, prudent Millennials will probably buy smaller quarters than their Boomer parents. But they’ll require space to be more functional.
“Time is going to be extremely precious. When they’ve got time, they’re going to be extremely focused on how they use it,” says Jim Blumling, vice president of marketing and product development at Pulte, one of the country’s largest home builders.
With that in mind, Blumling predicts more rooms of smaller size to provide “greater diversification of living environments.” Lofts might go to a new level, with partitions and flex space built into rooms.
Yet experts agree the fastest way to win the hearts and dollars of Millennials will be through technology. You can’t have too many phone jacks and conventional wiring will not cut it.
“This generation looks at the computer like their parents looked at the vacuum cleaner or refrigerator. Of course it’s there. It’s second nature. It’s a required component of the home,” says Sanford Goodkin, a real estate consultant in San Diego.
“These are technology snobs. Slow is out. They are plugged in, tuned in, turned on, wireless . . . all those things matter,” says Cynthia Cohen, president of Strategic Mindshare, a Miami-based consulting firm that focuses on consumer products and behavior.
Yet even with their penchant for high tech, common-sensical Millennials draw the line at bells and whistles that inflate the price of housing.
“Environmental controls and energy management systems are important, but none of this filling up the bathtub while you’re driving home from work,” says architect Looney.
“Boomers looked for the product,” adds Looney. For the last two decades, the “exploding foyer” has turned the heads of Boomers, he says. “Yet Millennials see a bigger picture.”
Indeed, Millennials may already be hatching tentative home-buying plans, but they refuse to be locked into any preconceived ideas–a flexibility that extends to product, price and location.
“Actually, I think about it quite often,” says Caroline Sneed, an 18-year-old from Hendersonville, N.C. “I definitely want to buy. Renting is not any kind of investment. You’re throwing away the money each month.”
Sneed, who has taken a year off school to work, originally thought she would settle in a larger city like Memphis, where she has worked in recent months.
“But the more I’m away from my small town, the more I appreciate it,” says Sneed, who now finds the country more appealing. “Part of it’s privacy. I like having my own space.”
Yet Sneed says that where and what she eventually buys will be determined by “where I’ll be in life. You have to be able to go with the flow.”
Alison Camp, a 20-year-old student at Calvin College in Grand Rapids, Mich., says she would love to live near her family in Aurora, “but it depends on jobs.”
And though Camp sees benefits in both new construction and older homes, her priority is not to overextend herself financially.
Lindsey Cook, a chemical engineering student at Georgia Institute of Technology, would like to stay in Atlanta and live downtown. The hustle and bustle of urban life is a big attraction.
“I love being here at Tech. There’s always something going on,” says 20-year-old Cook, who hails from the quieter suburb of Duluth, Ga. Yet buying a home will come after stable employment: “It depends on the job at first. Everything depends on that,” she says.
Though Millennials will undoubtedly inspire a host of product changes, their greatest impact on the home front will be the purchasing process.
Real estate has always been a “face-to-face, relationship-driven business,” observes Cecilian, the Richmond real estate consultant. “This is the first generation that will truly buy homes with technology.”
If real estate agents and builders want to reach out and touch Millennials, they’d better do it virtually.
“If you’re not on the Web, you’re dead,” says Russell. “This is the new Main Street. If you’re not there you may have customers today, but you won’t tomorrow.”
What’s more, Millennials don’t need the “high touch” that older generations do. They’ll prefer that a wealth of impersonal, detailed information about prices and taxes be given upfront.
“It’s that kind of complete disclosure that will appeal to Millennials,” says Russell.
And where Boomer surfers use the Internet to add to their shopping list of potential communities, Millennials use it as tool to weed out prospects, says Pulte’s Blumling: “If you don’t capture their interest and passion on the Internet, you may never see them.”
The challenge is to satisfy their thirst for information without selling them too much.
“Splash and sizzle and bells and whistles are not as appropriate for this crowd,” says Blumling.
Traditionally, home builders have not been regarded as cutting-edge marketers. Yet they are making strides, say observers. Today there is greater use of research and focus groups, and in the last two years, larger home builders have been hustling to get online.
“Twenty-five years ago, builders used to build by the seat of their pants,” says Gopal Ahluwalia, director of research for the National Association of Home Builders in Washington, D.C. But today’s builders are more sophisticated, he adds: “They have to be–the market is very competitive. The buyer is much more knowledgeable. Today when buyers walk into home, they know what kind of windows they want.”
The pressure will only intensify with Millennials.
As future consumers, Millennials will be “less willing to compromise than any previous generation,” says Russell. “In a competitive business climate that makes it increasingly important to figure out what (Millennials) want and to give it to them.”
Some builders are already thinking ahead. In the last three years, Kaufman and Broad has aggressively positioned itself to appeal to both Gen X and Millennials, says Jeff Charney, senior vice president of marketing at the Los Angeles-based building company: “For far too long, home builders have just concentrated on Boomers.”
As important as information to the next generation of home buyers, “the `hip factor’ is also crucial,” says Charney. It’s important to Millennials how you look as a company, he explains.
The West Coast builder has revamped materials, using more high energy hues–reds, electric blues, and magentas–in everything from signage to home models. Even its annual report sports an edgy yellow and black cover.
Millennials may not be rushing to apply for mortgages, but they are already throwing some weight around, say trendmeisters.
Cohen calls them “the great influencers” with an opinion on everything.
“They have a coolness rating for cars, pools, houses, restaurants,” says Cohen. What’s more, parents listen.
“Gen X did not have nearly this amount of influence,” she adds.
And because they have such influence on the household, it’s important to start reaching them today.
“You’re setting impressions today they’ll probably carry with them,” says Cohen.
