Putting extended families under 1 roof
Home is where not only the heart is these days — but also the elderly parents, the boomerang kids and the aging-in-place Boomer homeowners.
To accommodate the new generations-stacked-upon-generations lifestyle spawned by one of the most severe economic downturns in decades, builder Lennar Corp. on Saturday will unveil a house with something few others on the block can boast about: another house.
The company has built two San Bernardino County models of its so-called NextGen designs for its master-planned Rosena Ranch community. Like a Russian nesting doll with a smaller doll inside, the new residential design incorporates a smaller home with a separate front entrance, kitchenette, bathroom and bedroom.
Lennar designers and researchers and an independent architect developed the floor plans this year to respond to the doubling-up trend that has affected more than 1 in 5 U.S. households. Executives with the Miami-based home building titan hope the atypical designs will appeal to families moving in together and pooling financial resources; the idea is to draw them back into the beleaguered market for newly constructed homes, which is on course for its worst annual performance on record.
“This Great Recession has forced us, as builders, to push the envelope,” said Greg McGuff, president of Lennar’s Inland Empire operations.
“It is both formal and informal at the same time,” he added, strolling through one of the model home-within-a-home’s back bedroom doors and out onto a sunny patio. “It is both public and private. This is not a duplex.”
Targeting families who would be willing to double up with other generations is the latest sign of a building industry aiming to stand out from the glut of foreclosures and other distressed homes, which are largely selling at a discount. Several builders have diversified into other activities since the downturn and some are scaling back altogether.
But attempting to build demand for multigenerational homes is a move by builders that experts say is needed in the current market: providing housing options that don’t currently exist. Analysts said they expect other home builders to follow suit.
“This is a very favorable development for production builders like Lennar because they construct unique homes that have no competition from existing housing stock,” said Jonathan Smoke, executive director of research for Hanley Wood. “Plus multigenerational buyers typically purchase larger homes.”
But whether home builders can translate innovations into profits remains an open question. Lennar earned $20.7 million last quarter, a 31% drop from the same period a year earlier, when buyer tax credits fueled a temporary market rebound.
Once common, multigenerational households have declined in modern times, though they are staging a comeback due to economic factors. They made up 24.7% of households in 1940, then dropped as low as 12.1% in 1980 but rose to 16.7% in 2009, according to a study by the Pew Research Center that looked exclusively at households where everyone was related. The Census Bureau found last spring that 18.3% of U.S. households contained adult relatives or roommates, up from 17% four years earlier.
For many ethnic groups, particularly Latinos and Asians, a home embracing many generations is common. In 2009, 23.4% of Latino households and 25.8% of Asian households were multigenerational, according the Pew study.
“In many cultures, elderly parents are honored, active members of households, and many households encourage adult children to remain and save before venturing out,” Smoke said. “The real staying power to this trend is likely one focusing on minority households who will increasingly make up a larger share of traditional family households.”
Builders have offered options in the past for families living with relatives. During the last 15 or 20 years, builders marketed homes in Southern California with six or seven bedrooms as an option. Separate casitas, which are small living quarters typically with a bathroom and bedroom, were also common in many high desert developments.
“Here is a clever way of addressing something that wasn’t built during the boom years,” said Patrick Duffy, principal for research firm MetroIntelligence Real Estate Advisors. The main question builders are asking themselves, he said, is: “How do you make it special, not only against foreclosures, but a cheaper home that they themselves built only a few years ago?”
John McIlwain, a senior fellow at the Urban Land Institute in Washington, which studies trends in housing and development, said that targeting Southern California with multigenerational housing was “particularly appropriate” given the large ethnic communities. The design of the community and location will also be key as it is increasingly important for consumers to “not to have to drive forever.”
Located north of Fontana near Glen Helen Regional Park, Lennar’s developing master planned community has a pastoral feel and is a few minutes’ drive from Interstate 15. It is slated to have about 2,000 homes when complete.
The larger of the two-story NextGen homes on display at Rosena Ranch is about 3,000 square feet including the separate suite. The main home has four bedrooms, three baths, a great room with fireplace, separate dining room and a three-bay garage. The separate model suite is furnished with the trappings one might expect of an older parent: family portraits, cookbooks and a vase with lilies. Those homes are slated to sell in the mid-$300,000 range.
The smaller model is about 2,650 square feet. The main home has three bedrooms, two baths, a family room with a fireplace and a separate dining room. Items reflecting a young, post-college-graduate decorate the separate suite: Rockstar Energy Drinks, a book on the standardized Graduate Management Admission Test, a Pearl Jam biography and modernist paintings. The smaller home is slated for the lower $300,000 price range.
The median home price at the Sorrel neighborhood of Rosena Ranch was $307,000 over the last 12 months, according to Hanley Wood.
McGuff, the Lennar executive, said that although he envisions all types of family-pairing situations, the most likely match-up would be that of elderly parents moving in with their child’s family. That scenario would help a family more easily support a $3,000 mortgage, he said.
“Most of the buyers, ethnicity aside, will be those with grandparents moving in with them,” he said. “This has a huge economic advantage to it. We are not trying to hide that.”
The NextGen homes were first unveiled several weeks ago in Arizona and will also be sold in Nevada. In Southern California, they are also slated to be offered in Murrieta and Chino developments. Lennar declined to reveal sales figures so far for the designs.
Plagued by so many homes on the market and too few buyers, 2011 is shaping up to be the worst year on record for U.S. new-home sales. That slump is pushing the home-building industry, which is typically a major driver of jobs during a recovery, through a fifth year of decline and helping keep the U.S. economy from a rebound. Many economists don’t predict significant improvement in the economy until housing is fixed.
San Bernardino and Riverside counties are the epicenter of the ongoing foreclosure crisis in Southern California. Nevertheless, McGuff said that there remains interest, if not overwhelming demand, for new homes, even from people who have foreclosure on their record. The key is offering them something that they can afford and that meets their needs.
Richard Green, director of the USC Lusk Center for Real Estate, agreed.
“These large home builders are not dumb people. They do look hard at a market and where they can have a product that meets what the market is demanding,” Green said. “What that used to be — unfortunately, thanks to adjustable-rate mortgages — were houses that people couldn’t afford.”