Millennials poised to drive housing demand with home purchases
1. IT’S COMING: THE NEXT WAVE IN
HOUSING, POWERED BY MILLENNIALS
Millennials, the 90 million people
born between 1981 and 2000, are
poised to make a major impact in
the housing market
Sponsored by The True Life Companies (TTLC)
WHITE PAPER
2. FINALLY, despite the challenges posed by
underemployment, subpar wage growth,
rising rents, and student debt, the huge
millennial generation is amassing the
necessary down payments and starting new
households. According to a Demand Institute
survey millennials will form 8.3 million new
households in the next five years. The same
survey found that 79% of millennials expect
their financial situation to improve and 74%
expect to move in the next five years.1
Currently, millennials make up 32% of home
buyers,2
and 70% of first-time home buyers,3
the largest share in both categories.
This white paper examines the trends and
how they support an emerging alternative
niche investment—land targeted for approved
residential development.
THE NEED FOR ENTITLED HOMESITES
As demand builds for suburban single-family
residences—the preferred home for 52% of
millennials who are seeking to buy or rent4
—so does demand for ready-to-build land for
residential development, known as entitled
homesites. The sponsor of this white paper,
The True Life Companies, specializes in this
market segment.
THE “RENTER GENERATION” NO MORE
Millennials have earned that label for
understandable reasons.
The great recession suppressed their earnings
and ability to save up a down payment.
Millennials are already burdened by a
higher student loan debt than any previous
generation, making it difficult to save for a
down payment. Now, however, new Freddie
Mac, Fannie Mae, and FHA loans are allowing
millennials to get mortgages with smaller
down payments and more affordable monthly
payments.5
According to the Bureau of
Labor statistics, unemployment is showing
gradual, slow improvement, going from 5.7%
in January 2015 to 5.0% in November.6
The
average hourly wage grew 2.5% from October
2014 to October 2015, the best growth rate
since the great recession.7
As the economy improves, millennials
are beginning to respond to their innate
nesting instinct: according to a study by the
National Association of Realtors, 39% of Gen
Y homebuyers (millennials) were motivated
just by “the desire to own a home of their
own.”8
The study also found that for the last
two consecutive years millennials formed the
largest group of recent buyers. Although first-
time buyers’ share of all home purchases had
slipped to 32% in 2015, historically first-time
buyers account for 40% of all home sales.9
Three-quarters of millennials and half of all
adults say they are somewhat or very likely to
move in the next five years.10
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The Los Angeles Times, February 1, 2015 quoting
Kathleen Hart, Wenatchee Washington
We were just tired of renting,
tired of sharing with roommates
and not having a place of our own.
Finally the numbers added up.”
“
3. THE LARGEST GENERATION
Millennials, or Generation Y, overtook baby
boomers in 2015 and now make up the
largest generational cohort. As the Pew
Research Center chart below indicates,
they’re projected to do so for years to come.
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OVERTOOK BABY BOOMERS IN
MILLENNIALS
2015
80
70
60
50
40
30
20
10
0
79 Million
Millennials
50 Million
18 Million
2014 2028 2036 2060
Population Projections by U.S. Generation
Note: Millennials refers to the population ages 18 to 34 as of 2015.
Source: Pew Research Center tabulations of U.S. Census Bureau population projections released December 2014.
Millennial Baby Boomer Gen X Silent
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Who are these millennials and how are they
different from previous generations? The
table below provides a brief definition of each
current generation. The data is derived by a
comprehensive Generational Differences Chart
developed by the Workflow Management
Coalition. There are now 87 million millennials
in the U.S. compared to 76 million baby
boomers, the next largest generational cohort.
And the most common age in America is 22,
a millennial. Millennials are far more diverse
than baby boomers. Only 56% of them are
white compared to 72% of boomers.11
Baby Boomers
1946-1964
52-69
The “Me”
generation
Civil Rights,
Vietnam War,
Cold War, Sexual
Revolution
Equal rights,
personal
gratification,
team oriented,
optimism
Generational Differences
Traditionalists
1900-1945
70+
The silent
generation
WWII, Korean War,
New Deal
Conformity, duty,
family, law and
order, patriotism
Millennials
1981-2000
16-35
Generation Y
Digitial media,
cell phones,
AIDS, terrorist
attacks, economic
expansion
Achievement,
consumerism,
confidence,
technical savvy,
advanced
education, fun
Birth years
Current age
Also known as
Influential events,
trends
Core values,
attributes
Generation X
1965-1980
36-51
Post boomers
Watergate,
Energy crisis,
environmental
awareness, dual
income families
Balance, diversity,
fun, high job
expectations,
pragmatism,
informality
5. OWNING VS. RENTING:
IT’S NOT ALL ABOUT COST
There’s a widespread perception that owning
a home is less expensive than renting.
Although it may be influencing many first-
time homebuyers, it’s a perception based on
several false assumptions. Upon close analysis
it doesn’t hold up. For one thing, costs of
renting vs. buying vary greatly by location. As
can be seen in the chart at right, in all but a
few metro markets buyers will be paying a
premium over what they’d pay in rent. For
example:
• San Francisco buyers will pay an average of
$2,556 a month more than renters
• The U.S. homebuyer will pay an average of
$146 a month more than a renter
• By contrast, a homebuyer in Tampa will pay
$125 less than a renter.
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Chart courtesy of John Burns Real Estate Consulting
6. However, cost is not the only—nor necessarily
the most influential—factor in the buy vs.
rent decision. Buyers are highly motivated by
the sheer desire to own a place of their own.
The fixed monthly payments and long-term
financial stability of home ownership are
strong attractions to millennial homebuyers.12
Not to mention the ability to deduct their
mortgage interest from their income tax,
which as renters they couldn’t do. They also
find that homes for sale are typically higher
quality than those for rent. And buyers have
the option of improving or customizing a
purchased home to satisfy themselves rather
than the landlord. They prefer homes that
aren’t “cookie cutter” and according to one
survey 30% would choose a fixer-upper over a
move-in ready home. They want homes that
are compatible with their strong interest in
technology and innovation.13
Millennial home ownership similarly varies by
location, from a low of 23% in Los Angeles,
one of the most expensive real estate markets
in the U.S., to a high of 56% in Grand Rapids,
Michigan, a far more affordable market.14
ARE FIRST-TIME BUYERS MAKING A
COMEBACK?
Historically, first-time buyers have made
approximately 40% of all home purchases.
That dropped dramatically to 33% with the
great recession, and was as low as 28% in July
2015.15
But first-time buyers may be bouncing
back. They constituted 32% of all home
buyers in August 2015. That slipped to 29% in
September but rose to over 30% in October.
Millennials comprise
68% of first-time buyers
and that percentage shows
promise to grow. A TD Bank
survey found that 67% of
millennials say they’ll be looking
to purchase their first house within
two years.16
The average age when people
get married for the first time in the U.S. is
currently 28, the high end of the millennial
age range. Sixty-five percent of older
millennials say they intend to purchase a
home in the next three months17
and have
managed to stabilize their finances by paying
down student loans and other debts.
According to realtor.com, the top 10 reasons
for home shoppers of all categories to be in
the market are:
• Increase in income (35%)
• Tired of current home (34%)
• Favorable home prices (32%)
• Favorable interest rates (28%)
• Increasing rent (22%)
• Change in family in circumstances (20%)
• Planning to increase family size (19%)
• Increase in family size (18%)18
These are reasons shared by many
millennials, who also have another overriding
reason: they’ve been waiting long enough,
and they finally have the wherewithal to buy a
“home of their own.”
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OF FIRST-TIME BUYERS ARE
MILLENNIALS
68%
7. WHITE PAPER
HOUSING’S CONTINUED EXPANSION
The coming of the millennials promises to
accelerate the momentum of an already
dynamic housing market, which has seen
significant YTD gains over last year in key
categories:19
• Existing home sales up 7.9%
• New home sales up 17.7%
• Housing starts up 12.0%
• Median home price of sold homes up 6.4%
• Home price index (FHFA) up 5.5%
• Rents (CPI) up 3.6%
People need homes, and the U.S. is
experiencing major population growth.
According to the Census Bureau, 40 million
more people are living in the U.S. today than
there were on January 1, 2000—322 million
versus 282 million. A baby is born every eight
seconds, while there is a death only every 12
seconds. An international immigrant arrives
every 33 seconds. Result? The country gains
two to three million new people a year. People
who need homes.20
MEETING THE DEMAND
The builders and developers who will be
providing homes for millennials also have a
need: entitled residential lots, or ready-to-
build land for single-family homes. Only the
largest builders and developers can afford
to maintain an inventory of entitled lots.
Other builders need to find a solid supplier
to support their business plans. That’s where
The True Life Companies (TTLC) come in. We
specialize in the types of land the changing
market seeks. Our inventory is concentrated
in suburban properties in the West, where
the greatest growth has been taking place.
In metro areas like Los Angeles, Phoenix,
Denver, the Bay Area, and Sacramento. For
investors and their advisers, TTLC represents
a niche asset class that can fill in the gaps
to help diversify and balance a portfolio. Our
carefully selected properties offer investors
both defensive and offensive attributes: capital
preservation and inflation protection as well
as asset appreciation.
Sponsored by The True Life Companies, real estate investment specialists operating in California, Arizona,
Colorado, Texas and Hawaii. For more information on our company and investment opportunities, please
visit our website: http://thetruelifecompanies.com/partnership/ or call Joe Fraser at 925.824.4303.
Please contact us if you have comments on this white paper or wish to order reprints.
Disclaimer: These materials are for informational purposes only and do not constitute an offer or solicitation to sell any securities. Offers to
sell securities will only be made to accredited investors and people qualified to purchase such securities in an offering exempt from registration
under applicable securities laws pursuant to separate confidential offering documents. Investment involves a high degree of risk including the
risk that the entire amount invested is lost. There can be no assurances The True Life Companies’ targets or investment objectives will be met.
In considering the performance of any affiliate of The True Life Companies, the reader should keep in mind that past performance of any other
affiliate of The True Life Companies is not indicative or an assurance of the future performance of any affiliate of The True Life Companies. There is
an inherent risk of loss in all investments. Past performance is no guarantee of future results.
