Game of homes!

Last weekend I attended a conference on the future of Real Estate. As in most of these professional meetings, the most interesting thing lies in the public reflections that are generated and not so much in the search for concrete answers by the speakers. In my case, what I took away from this last appointment was the exchange of vision I had during the coffee break on the second day with two colleagues from the sector. The first of them, American, from Nevada specifically, about fifty-long years old and dressed in a tailor-made suit that denoted his heritage of the 'old school'. The second was much younger, a thirty-year-old from Stockholm, with a strong Swedish accent and an outfit that I called in my head: 'cool sporty elegance'. But, of course, the interesting thing about our meeting did not lie in our styles, but in the conversation that was generated during those scarce fifteen minutes, during which we exposed our generational vision of how we understood the real estate market and, most importantly, how we saw how we faced it at the "user" level.

One of the first ideas I came up with was the concept of "aging at home," a trend that was already gaining popularity before the pandemic, and that seems to have sparked renewed interest among baby boomers, some of whom are now wary of nursing homes. Not in vain, let's remember that, in Spain alone, more than 30,600 people who lived in these centers died because of the pandemic; some data that can be consulted in the online public report of RTVE in this regard.

This trend of not wanting to move from our home is spreading to later generations in Spain, such as Generation X and even the millennial generation. The shortage of inventory of affordable housing and the handicap of current rental prices in large cities, leads to frustration to the younger generations who begin to consider living with their parents until they inherit the house and age in the same home that saw them born.

Even so, Melvin Bengtsson, my Swedish interlocutor, made me see that in northern Europe, the generations after the baby boomers had somewhat more optimistic approaches. According to Melvin, more than 20% of buyers who have recently purchased a home belong to Generation X. A rising data that can contrast positively with the report of generational trends of buyers and sellers of homes of NAR 2021. In this report, in addition to indicating that about 24% of the current ones belong to Generation X (this being the highest rate among all age groups), it is highlighted that, approximately, the same percentage of Gen-Xers have also been sellers of homes, suggesting an exchange of needs or changes of home between this generation rather than a search for substantial gains in property or real estate wealth.

A question of purchasing power

Within that same discussion, our Nevada colleague, Jacob Nguyen, shared with us data from Zillow's latest analysis of the age, sex, race and income of homebuyers over the past decade in the US. As Expressed by Jacob, Millennials and Baby Boomers are "competing" in the United States for the acquisition of properties throughout the country.

If we take into account the sum of being faced with an aging population with a currently booming economy, we can discover that people of all age groups over 30 are buying homes at a much higher level than the data before 2010. Even so, Jacob explained to us, in turn, that there is currently much more demand than supply in the main American states, which translates into an "acquisition war" between Baby Bomers and Millennials.

In Spain we have also seen how the pandemic has supercharged the demand for housing, especially within the rental market and, especially, among millennials. Previous generations, on the other hand, have chosen to accelerate their retirement plans. Two different realities that, however, have converged is the same end: both drove the decisions of moving looking for a different home than the one they occupied until then.

As I explained at the beginning of the article, our conversation lasted practically the same as our coffees in the cups, but interesting reflections emerged that motivated me to continue reading and researching these trends during the following days. This interest can contrast with other professionals in the sector that, although millennials are the main current players in the housing market, buyers tend to age. The average age of someone who bought a home last year is 44, up from 40 in 2009. This is mainly because Baby Boomers, who make up a large portion of the population, are also more active in the housing market than they were 10 years ago.

To continue with this line of percentages, the proportion of recent buyers who are 60 years or older grew by 47% from 2009 to 2019. However, over the same period, the proportion of recent buyers aged 18-39 has fallen by 13%.

This means that millennials, who currently have to deal with the recovery of unemployment rates, more precarious wages, tax increases on basic goods such as the electricity bill... are important handicaps to face the acquisition entries in the purchase of homes.

Does all this mean that the future of home ownership for the millennial generation is more pessimistic than uncertain? Let's now do a common exercise of time travel, until 2029, for example. Let's think that, in that year, the youngest baby boomers will turn 65 and the older ones will be 83. As this generation moves into retirement, some will sell their properties and, if they don't, they will be inherited by their descendants, i.e. generations like the Z and millennial. The "real estate wealth" will then pass into the hands of those who now cannot compete with the "same weapons" in this war of home acquisition. Something that, in spite of everything, is cyclical and shows us that in reality we should not see this situation as a confrontation, but as two parallel realities that are destined to coexist and, of course, to understand each other.

David Granell Moreno

CEO