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Q&A: NAR's Lautz says multigenerational homes are on an upswing

More and more homebuyers are sharing space with their parents and adult children — and those buyers are getting younger.

That’s the conclusion of the National Association of Realtors (NAR), which recently reported that Generation X has surpassed older generations as the most likely buyers of a multigenerational home (a home in which at least two adult generations reside). Scotsman Guide News spoke with Jessica Lautz, NAR's vice president of demographics and behavioral insights, to dive into the latest numbers and see what they mean for the real estate finance industry.

JessicaLautzCan you give us a bird’s eye summary of your latest findings regarding multigenerational homes?

We've been doing this report for six years and what we have seen historically with this data set is that the [baby] boomers were the most impacted by multigenerational homes, especially younger boomers. But we have seen that torch actually passed along to Gen Xers this year. Sixteen percent of Gen Xers are purchasing a multigenerational home. And when we asked the reason why, 52 percent — more than half — said it’s because their children have either boomeranged back or they have never left their house. It is definitely impacting their buying choices as they move forward in the process.

Was this something that’s been coming for a while, or was this a big change that wasn't expected this soon?

There has been [incremental change], and I've seen the incremental increase in the data as we put together the report over the last few years. The presumption was always younger boomers for that sandwich generation — they felt the pressure from aging parents and adult children. But in the last two years that number has shifted, where we have seen the growth in Gen Xers [and] where it's no longer just a boomer thing. It's now solidly a characteristic of Gen X as well.

Gen Xers purchase the largest homes, on average, according to your data. Has this trend contributed to that?

Absolutely. Multigenerational homeowners typically purchase a larger home overall. They’re typically 2,100 square feet. Gen Xers are in their peak earning years. They have larger families overall. They’re likely to have children under the age of 18 in their house. You just need a larger space to be able to accommodate everyone.

Are Gen Xers paying for these larger homes by themselves, or is there an indication that the parents or adult children who are moving in with them are contributing?

When people go to purchase a multigenerational home, 10 percent overall say that they want to so that multiple incomes can afford a different type of home — a larger home, a better home — together. In quite a few of those homes, there are multiple people contributing to the mortgage — or maybe there’s someone upstairs, a renter on the property, or perhaps there’s an in-kind utility-cost contribution to the household.

Do you expect the multigenerational homebuying trend to grow within Generation X?

I would expect that, as Generation X moves into their 50s ... that this is likely to increase. Right now, they’re between the ages of 39 and 53 when we collected this data. There’s a growing cohort of them moving into their 50s, so the expectation is there. But they’re not the only ones buying multigenerational homes. We’re actually starting to see that even among the millennial generation — 9 percent of older millennials purchased multigenerational homes. And millennials are the most racially diverse adult generation to date, and I think that becomes really interesting as well, because multigenerational homebuyers are more likely to be diverse, [both] racially [and] ethnically. So, as we see more diverse populations growing as a share of the U.S. population and becoming adults, the multigenerational home trend is likely to grow as well.

Some people say this could be the year that entry-level home prices calm down, allowing more buyers at that price point to reenter the marketplace. Do you see that potentially decelerating the multigenerational trend anytime soon?

It’s something that’s mixed, because you do have some inventory entering the market. You do have historically low interest rates. But at the entry-level market, there’s not the inventory available for buyers today. So, after living at home [with their parents] for a longer period of time, a potential buyer may be able to save for the downpayment and save beyond an entry-level home. That may give them that opportunity to enter homeownership through that direction. And we have seen that nearly a quarter of first-time homebuyers are moving directly from their family members’ homes into homeownership, so we are seeing a shift in how buyers are saving, paying down their debt and entering homeownership.

Is this something, especially in recent years, that has increased the age of the first-time buyer?

We haven’t seen that, actually. In the data, when we look at the age of our first-time homebuyer since 1981, it’s between the age of 28 and 32 — and it’s stayed very flat. That being said, the age of the first-time homebuyer today who’s entering the market may be the same, but they are a different type of buyer. They have higher income [and] they’re more likely to have family help with their downpayment or have family help because they’re able to live at home first before entering homeownership. That’s a different type of buyer than buyers we have seen historically.


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