How Do Evolving American Households Affect New Homebuilders?

Over the last few years, we’ve conducted How We Live™ surveys, studies designed to explore homebuyers/owners’ housing preferences, needs, and home purchasing drivers. With a focus on “the life lived in the home,” our motivation was to use the resulting insights to help builders design, build, deliver and market better homes.

This year, we’re extending the scope of our research efforts and depth of our inquiry. We’ll still focus on the way consumers live at home, but we’re also engaging other experts to understand exactly who is living in the homes you build and why, not just how. For starters, Peter Dennehy of Meyers Research LLC and Amanda Stinton of the National Association of REALTORS will join us next month at the Innovation Summit to share some key trends and discuss how to leverage that information in your business.

The fact is a number of demographic trends are changing the homebuilding marketplace. One of them is the evolution of the American household, or “family”. Here are the main factors:

The U.S. population growth rate in the United States is declining, and birth rates are falling. Additionally, overall household size has fallen
The rate at which households dissolve and re-form is increasing as the number of couples divorcing and people re-marrying rises
Baby boomers continue to dominate the housing markets
Millennials are slow to enter the market
The population is aging
Single person households are on the rise.
The traditional nuclear family is in decline.
Childless couples, singles, and other non-family arrangements are becoming more common.
Multigeneration living arrangements are increasing.
Foreign-born households and their children also continue to account for a significant share of household growth.

The increasing diversity of society is providing new challenges for the building industry, particularly in the area of house design. Changing demographics also dictate a need for an expanded range of housing options that take into account both non-traditional nuclear family households and ethnic and multicultural buyers.

The single detached home on the single lot in the suburbs (the American Dream) is less suited to the needs, aspirations and life-styles of many of these non-traditional households. There’s a demand for smaller homes and different locations. At the same time, multifamily homes as well as housing with design features to accommodate non-traditional households and aging populations are in greater demand.

Our industry is clearly in transition, with growing pressure from the diverse and demanding consumers, labor shortages, and increased emphasis on sustainable, high quality housing plus environmental and regulatory compliance. Yet, consumers will continue to be a primary force in determining how this transition will evolve. The ability to connect to customers and meet their complex needs in today’s highly competitive landscape is essential for the entire industry. Doing so will require all players across the homebuilding chain to work as a single enterprise, sensing and responding rapidly to consumer demand in a coordinated manner.

How we can help

Connecting to today’s consumer means understanding their needs, preferences, and what they’re willing to pay for. That means research, which can be expensive and time consuming. Consider our efforts so far:

We conducted a computerized search, using web-based search tools, such as article databases, web of science, and other e-sources to compile the body of market research reports, program evaluation reports, and other industry publications relating to the Evolving American Household and housing. We allowed studies from the past ten years, since the time horizon will help us to identify shifts and changes over the long run.
We then used ordinary web-searches to track cited references and to find publication titles.

By using the above method, we’ve collected 42 relevant publications so far, and the number is still growing. That’s a lot of reading. But that’s why we’re here.

We intend to review this body of research so you don’t have to. In addition to looking for insights and trends, we’ll look for divergences from common beliefs as well as discrepancies in the literature. For example, there are conflicting reports on the willingness of homebuyers to pay for high performance homes or quality-related features. But dig deeply into the literature, and some interesting problems are revealed. For example, results can be highly influenced depending on the research methodology used.

Attitudinal surveys are widely used to evaluate the degree of consumers’ favor or disfavor around a product, but they often have mixed success actually predicting whether consumers will purchase he product. Consider a high performance home or products such as xxx, yyy, or zzz, which we know can improve a home’s livability in terms of comfort or safety. The available literature commonly reports that many consumers lack familiarity with new high performance technologies. Combined with a second theme found across the literature—the failure of homebuilders and other players to properly educate consumers— and we have to question the validity of their preferences for certain attributes or features when they haven’t directly experienced them.

Expert critiques of attitudinal studies say certain methods (closed-ended questions, such as multiple choice, versus open-ended questions) may reflect consumer ideals for socially desirable values rather than their real purchase intentions. Who wouldn’t fill in a bubble that says they care about the environment, which is a concept many homebuyers equate with high performance, and little more. As a result of the “feel good” answers often given in support of “green” or progressive technologies, studies can overstate the demand for related products, although in reality they would not spend any extra money to purchase them.

In our deep dive, we’ll take these type factors into account, placing a higher weight on research methodologies that avoid these social desirable answers, and instead measure the implicit attitudes of respondents—that is, attitudes of which the consumers may not be aware, but nevertheless influence their behavior and decision-making.

Why does this matter? While our methods have changed, our ultimate vision has not. By collecting research, distilling it, teasing out relevant insights, and making recommendation for implementing them in builders’ businesses, we hope to translate the value of performance for various audiences, from homebuyers to realtors and mortgage appraisers, whose understanding would result in builders being paid for the performance they deliver.