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Changing Family Unit Makes the Future Dicey for Builders

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SPECIAL TO THE TIMES

The typical American household is about to go the way of the woolly mammoth.

In a demographic trend that has huge implications for the housing industry and its customers, just half of all married couples have children under the age of 18 living under the same roof--and by 2010, the most dominant category of household will no longer be mom, dad and the kid. It will be “other.”

With families coming in so many varieties, said economist Leanne Lachman, co-author of a new report on real estate demand during the next 30 years, builders will have to refine their products to reach their intended buyers. One-size-fits-all won’t do.

Take empty-nesters, for example. The number of households with kids no longer residing at home will “explode” in the next 10-15 years, but it’s “unclear” whether they will remain in their homes or move to smaller houses--or even apartments.

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“Couples without children are a real challenge,” said Lachman, who is managing director of Land Lease Real Estate Investments in New York. “They will not be pigeon-holed.”

She suspects the majority will choose to “mature in place,” but she thinks many will opt for not one new residence but two--one in the city, where they can enjoy their weekends, and another far out in the suburbs, where they can live quietly and safely during the week.

A Question of Buy or Rent

But even then there’s the question of whether they’ll buy or rent, and in which location. If they decide to become tenants rather than owners in one location, the economist notes, there may not be enough product in the pipeline to satisfy the demand.

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Households are already diverse. Eight percent of all children under 18 live in the same household as a grandparent. Half the single men are 25 to 44, whereas half the women living alone are senior citizens. Fifteen percent of all families include an adult child still at home. Indeed, 21 million adults--mostly males--still live with their parents.

But a decade from now, these groupings will be even more distinct. Not only will the share of marrieds with kids continue to shrink, but the number of single-parent families will keep growing, as will the number of people who live alone. And by 2030, there will be no dominant age cohort--meaning there will be roughly the same number of people in every age bracket, from age 25 through age 70.

Thus, the test for builders is twofold: Not only must they identify their target markets, they must find ways to satisfy the vastly different demands of each group.

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There are dozens of market niches, Lachman said. There is no stereotypical renter, and home buyers can’t be categorized, either. For builders, deciding on a target for their wares is one thing. But it’s far more difficult to figure out how to reach them.

You don’t have to be a fortuneteller, she said. The key determinants of demand are already in place. The future market has been born, and we know a lot about it. The question is how lifestyles will affect choices.

One way builders have been addressing the housing market’s growing diversity is customization. In many subdivisions throughout the land, for example, buyers are offered a wide array of options and upgrades.

Meeting the Market’s Needs

But noting the tremendous pressure on product differentiation, Kenneth Wong of Walt Disney Imagineering, the developer of the widely acclaimed Celebration new town in Orlando, Fla., says even wider mass customization is necessary if they hope to address ever-narrowing market segments.

James Klingbeil, a multifamily builder based in San Francisco, agreed, but warns that the market for distinctive, almost one-of-a-kind homes may not be as strong as some people believe.

It’s a mixed bag, Klingbeil, the president of American Apartment Communities, said. Almost every kind of innovative development has been successful because the demographic mix has been far greater than anyone realized.

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But Klingbeil says it’s his sense that some market segments may prove to be fairly shallow.

While Lachman suggests that builders use research to learn how to reach their intended buyers, most rely on their instinct. “We do market studies to satisfy our lenders,” said Avi Brosh, who builds high-density, single-family projects in the Los Angeles area. “But we do things by intuition.” And his intuition tells him that his product has to be very diversified.

“We’re not in the widget business,” he commented, noting that not one of his 10 current projects is like another. “We won’t even have a sales office in some places because some people don’t want to be seen in them.”

Variety is also the spice of life for developers of big, master-planned communities. Five years ago, for example, the Howard Hughes Co. offered only a handful of models at Summerlin, the hugely successful master-planned community in Las Vegas, which will count 3,300 sales this year. Today it offers 30, and the mix will only get larger in the future, said the company’s Daniel Van Epp.

In Denver, meanwhile, where Forest City Development recently purchased 5,000 acres at the old Stapleton Airport, plans call for no fewer than 12 different product types--not models, but product lines--in the project’s first phase.

The diversity will be huge, said Forest City’s Greg Vilkin. “We want to build neighborhoods which are not homogeneous.”

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Lew Sichelman is a syndicated real estate columnist. He can be contacted via e-mail at LSichelman@aol.com. Distributed by United Feature Syndicate.

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