The following are the notes prepared for my part on an April 2015 ULI panel in Raleigh to address the changing environment around marketing dwellings to Baby Boomers and Millennials:
Will Yadusky:
I was born 31 years ago, so I’m a full on Millennial.
I do Acquisition and Development in the for-sale residential world. I’ve been at Baker Residential for about a year and a half of about 8 years in the home biz. We build sweet houses. bakerresidential.com
I see my peers spending $225-375k depending on location but regardless of family status. A few aim as low as $175-ish if they want to start with a lot of equity, But mostly, it seems that the millennials who can’t afford $225k are content to stay renting and fairly few millennials can afford a down payment on a jumbo loan without Mommy and Daddy helping, yet.
I think kids are the deciding factor right now between whether folks younger than 36 are hot for the central business district vs aiming to buy in a more car-dependant location. Most of my childless home-owning peers with whom i interact on the most regular basis live, like me, inside the beltline or within a mile or two of it...have to drive to work but are within walking distance of a grocery or drug store, and a pub or coffee shop. Accordingly, I assume that I can’t really build new homes for millennials pre-kids anywhere but infill in Raleigh. It’s incredibly tough to sell infill to a corporate land committee because it’s basically impossible to spread the overheads or justify the comps. I could go into detail, but I’ll generally use the napkin math that most of the infill deals I’m looking at have the raw land cost so high that the profit margin is about 5% on a $600k house which means it’s a deal not worth doing at a price point millennials can’t afford, anyway.
BUT, builders can focus on Boomers who will “move down” to a $600k semi-custom master-down new home in an infill project and we childless millennials can buy one of the resales in Lakemont or Meredith Woods that our parents’ friends are leaving behind when we get them into a new 1.5 story.
At the same time, we builders can try to place the classic family buyer in the greenfield-ish projects that they seem to have flocked to since W.W.II.
Family-Buyer Millennials offer some nuances that I think have been unseen in the family buyer for a while. Here are four:
1) A new type of location sensitive. Some families are choosing to live just outside downtown (like the Tryon, Edward Mill, or Lynn Rd corridors), walk to groceries and coffee and drive 10 minutes to North Hills or Downtown, Other families are identifying exurban nuclei like Fuquay, Wake Forest, or Chapel Hill (even “old” Cary) to raise a family if they can still walk to a gym, drug store, pub or coffee shop. It’s weird for a lot of us to think of infill projects in Clayton or Youngsville without laughing. But only 15 years ago, when the last millennials were just being born, many of us would have laughed at the idea that by this time, literally thousands of houses at jumbo loan prices would be occupied along Kelly Rd/Green Level Road from Apex to RTP.
2) Unlike the Boomer generation that fostered the explosion of golf course communities that openly marked the economic success of a family unit, my generation is choosing to spend its housing allowance on engagement in and identification with social good. There’s a lot of us 29 year old jackasses with multiple degrees wearing Tom’s shoes, driving our bio-deisel ‘80’s Mercedes to the Whole Foods for fair trade coffee with our adopted children on the way from our jobs at SAS to the non-profit we run on the side. I don’t know if you’ve ever gone shopping for fair-trade, local, hybrid, organic children to adopt, but they’re not cheap. If my fellow builders want us whipper-snappers to shell out for a 4 bedroom in souless suburbia, it better have some colloquial architecture, sweet trail access, untouched trees, historical sites, and topography, locally sourced sustainable building materials, and probably some solar in there somewhere. An on-site farm would be a brilliant idea for our consciences and our kids’ upbringing.
3) Everybody is realizing that no matter how nice the smell of cut grass and fresh paint, that life is short and we have better things to do than winning “yard of the month”. The preference for non-involvement in home care was once relegated to bachelorettes and retirees. But Boomers, and Gen-Y both seem determined to spend money on pursuing consumables and experiences more exotic than replacing no-name air conditioners every 5 years, power washing vinyl every 6 months, re-caulking sink bowls to laminate vanities every year, replacing stained carpet in their first floor traffic areas every couple years, or adding french drains on their flat, compacted lot to keep water from standing against their slab by their un-piped gutters. Groups like packpurchase.com are making it easier to outsource maintenance if you want someone else to mow your half acre and clean your gutters. But builders can “quit building shit” in the first place and eliminate a lot of the squeaky wheels or doors or drawers (as the case may be) by building durably and thoughtfully. We can also create HOA’s which include or offer exterior maintenance. It’s literally a copy and paste job to make any new community a maintenance-included community at this point.
4) Though, on the whole, most Gen X-ers seem content in production homes with mostly surficial options, every boomer I know who doesn’t live in a Del Web community already, and nearly all my millennial peers are hunting for uniquity and non-conformity in their housing. Some are shopping for resale that was a tract house 50 years ago but has been or can be upfit or added onto. A few are chasing the one of a kind lot-specific full-custom tear-down new construction or gutted remodel. For us builders, the architectural challenge is immense. How can we purchase and construct efficiently AND leave any room for much architectural variety? The answer, I think, is in self-imposed anti-monotony standards, underbuilding the building envelope on one or more sides to allow for after-market plan revisions in the future, and podding out projects into less than 50-unit clusters of any single product offering. Builders, like Baker, who employ those three practices are rewarded with above-market total prices and prices per square foot.
A quick note on Entitlments
1) Municipalities have got to make “Low Impact Development” and per-lot stormwater devices easier to get approved…and to “bond over”. I could go on. But, if it was feasible, who wouldn’t rather have a plat note about maintaining a rain garden versus paying for an HOA that maintains a another trash-collecting lump and dump stormwater pit - I mean pond?
Those of us in Acq and Dev have to be sensitive to the fact that, because of stormwater regs, pretty much anything we plat in the Raleigh area anymore will have to have an HOA to maintain BMP’s indefinitely. This means that what we entitle and/or build will have a multi-generational life span. We MUST take this responsibility seriously.
2) *In real life, (And Jonathan can attest to this), infill land is coming out of the subdivision factory with some quality control problems. A site might come fresh out of the packaging with a champion tree where a fire hydrant ought to go, a parking space that’s a foot too narrow and a back deck that encroaches in a street yard buffer. Raleigh, bless their hearts, is leading the pack on handling issues by offering approval paths for innovative land uses / re-uses that don’t quite fit into the pretty LDU / UDO box – more or less an established route for variances at a staff level. Every jurisdiction needs staff to have some wiggle room without a quasi-judicial showdown.
Thanks.
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