Below is a complimentary Demography Unplugged research note written on 11/23/20 by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.
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Multigenerational homes now constitute 15% of home purchases, compared to 11% before the pandemic began in March. Current multigenerational home buyers are most likely to cite caring for their aging parents as a top reason for their choice. (National Association of Realtors) |
NH: The 2020 pandemic has added a powerful tailwind to a 15-year-old trend: America's renaissance in multigenerational living.
The average number of adults per occupied housing unit reached its all-time low in 2001 and 2003. It took a big bump upward during the Great Recession. It kept rising through most of the recovery. And--though we will have to wait a year before we have the official Census tally--it has almost certainly surged again over this past year. For background, see "Household Formation: Why Is It Declining--and Where Is It Going?" "How Togetherness is Killing the Housing Market" and "All in the Family Marketing."
According to this new NAR study, "multigenerational" homes as a share of all home purchases rose from 11% pre-pandemic (that is, before April) to 15% post-pandemic.
Among all the reasons cited by multigenerational buyers for their purchase, the biggest jump was in those saying they need to accommodate their adult children. This reason rose from 13% to 20% of buyers. The dominant reason, though, continues to be the wish to care for aging parents (from 25% to 28%) and relatedly to spend more time with aging parents (17% to 21%).
With all this household expansion going on, not surprisingly, the typical post-pandemic homebuyer is more affluent and is less likely to be a first-time buyer in 2020 than last year. First-time buyers in 2020 are 31% of all buyers, down from 33% in 2019--and, despite the very large population of young adults still renting, way down from what it was 10 or 15 years ago.
As a long-term social trend, America's shift toward multi-generational households is nothing less than stunning. In 1980, 27.5 million Americans lived in such households. By 2016, it was 64.0 million. That's going from 12% to 20% of the population. Both the number and percent will certainly grow further once we know the data for 2020.
We've already reported on the pandemic-triggered wave of young adults moving in with other people, especially with their own parents. (See "Pandemic Accelerates Moving Back Home.")
According to Pew's estimates, the share of Americans age 18-29 living with parents as of July of 2020 hit 52%--exceeding the previous record of 48% tabulated by the U.S. Census in 1940 at the tail end of the Great Depression. (See "The Kids Are Back In Town" and "Is the Stigma Against Living at Home Finally Fading?")
But as the NAR study points out, that's not the only backstory going on. The large number of homebuyers who want to accommodate frail parents (often in their 80s and 90s) is also spurring Boomers and Xers to embrace multi-generational living. The pandemic is, of course, a key motivator here. Everyone knows that Covid-19 poses a dire threat to this population, and everyone has heard about the death-waves rolling through nursing homes. 31% of all U.S. Covid-19 deaths afflict the 1.5% of the population that is age 85+. 58% afflict the 9% that is age 75+.
The pandemic is thus delivering one more crippling blow to the long-term care industry, already hard hit by rising costs, limited reimbursement from means-tested programs like Medicaid, and declining appeal to age-in-place Boomers. (See "Are We Primed for a Nursing Home Shortage?" and "Nursing Homes Become a Thing of the Past.")
So long as the pandemic rages, operators' costs are up, skilled workers are scarce, and tours for new residents are cancelled. Even following the new vaccine announcements, the price of Ventas (VTR) is down by one third since January. The price of Brookdale Senior Living (BKD) is down by one half.
Also suffering is the construction of multi-unit housing and of small single-homes in urban areas or in inner suburbs--essentially, the housing types and locations that were doing best late in the recent economic recovery.
What's looking up? Well, obviously, single-family construction, especially in the exurbs. Add-on suites and in-fills (known as "accessory dwelling units" or ADUs) are very hot, especially after California's recent law overruling local government and HOA regs barring granny flats. Buoyed by the remodel-and-enlarge trend, the home improvement industry led by HD and LOW continues to its long and spectacular climb (See "Why Americans Are Spending More on Home Improvement.")
Larger home brands that explicitly invoke a multigenerational lifestyle are flourishing. These include "Multi Gen" homes built by D.R. Horton (DHI) and "Next Gen" homes built by Lennar (LEN). Lennar, which started this brand ten years ago, says a "Next Gen" suite is now included in 5% to 10% of all sales nationally and 25% of all sales in Phoenix.
The big question, of course, is how much of this multigenerational trend will unravel once the pandemic emergency is over. IMO, there will be a bounceback, but it will be slow and partial, not rapid and total. That's because the biggest structural drivers behind the extended-family lifestyle are economic and generational. They have been with us for years and have nothing to do with the pandemic. Covid-19 is merely the occasion for the latest ratcheting up.
Back in 2010, 2011, and 2012, a lot of people bet that the "living solo" habit would rebound quickly now that the GFC was over. They lost that bet. Those who now assume we will snap right back to a Pre-Covid world are, similarly, begging to be disappointed.
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ABOUT NEIL HOWE
Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.
A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.
Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."
Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.
Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.
Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.