Suburbs looking for ways to lure young adults back from cities

If young adults are going to the big city and staying in increasing numbers, how can suburbs get them back?

Demographers and politicians are scratching their heads over the change and have come up with conflicting theories. And some suburban towns are trying to make themselves more alluring to young residents, building apartment complexes, concert venues, bicycle lanes and more exotic restaurants…

Some suburbs are working diligently to find ways to hold onto their young. In the past decade, Westbury, N.Y., has built a total of 850 apartments — condos, co-ops and rentals — near the train station, a hefty amount for a village of 15,000 people. Late last year it unveiled a new concert venue, the Space at Westbury, that books performers like Steve Earle, Tracy Morgan and Patti Smith.

Long Beach, N.Y., with a year-round population of 33,000, has also been refreshing its downtown near the train station over the last couple of decades. The city has provided incentives to spruce up signage and facades, remodeled pavements and crosswalks, and provided more parking. A smorgasbord of ethnic restaurants flowered on Park Avenue, the main street…

Thomas R. Suozzi, in his unsuccessful campaign to reclaim his former position as Nassau County executive last year, held up Long Beach, Westbury and Rockville Centre as examples of municipalities that had succeeded in drawing young people with apartments, job-rich office buildings, restaurants and attractions, like Long Beach’s refurbished boardwalk. Unless downtowns become livelier, he said, the island’s “long-term sustainability” will be hurt because new businesses will not locate in places where they cannot attract young professionals.

This story should make New Urbanists happy. Because cities are attracting young adults with cultural amenities and jobs, suburbs have to respond with their own amenities. Simply existing as a bedroom community won’t cut it for attracting younger residents who want competitive housing prices as well as things to do. By appealing to these residents, suburbs can also win in two ways. First, their efforts to bring in more restaurants, stores, and cultural opportunities can help diversify their tax base. New commercial establishments and festivals help bring in visitors as well as residents who spend money. Second, these moves may also help make their downtowns and neighborhoods denser. This limits residents’ reliance on cars and makes streets more pedestrian friendly.

Of course, many of these suburbs will find it difficult to compete with (1) the big city and (2) other suburbs. Popular tactics in recent years across suburbs include transit oriented development involving condos and amenities near railroads or other mass transit and trying to build a more vibrant downtown around restaurants and small but unique shops.

Can Costco thrive if younger Americans don’t have the big houses to store all the bulk items?

Costco’s earnings have been down recently, leading to questions about whether younger Americans want the items they have:

The suburban, car-loving, McMansion-owning parents of millennials represent Costco’s core customer base. But what about millennials themselves?…

But the fact that in early March Costco reported lower-than-expected earnings and its stock price has slumped now has some wondering if the company can stay on its hot growth streak going forward. In particular, concern is being raised that Costco’s membership model and its bulk-goods products don’t appeal to the nation’s young consumers—and that the Costco experience might not be a good match for the millennial generation even after they grow older and have families.

It’s understandable that Costco’s customer base skews older. A car is all but a necessity for the typical “stock up” visit to Costco, and compared to older generations, millennials tend to not own cars and don’t seem to want to own cars. Most Costco stores are in suburban locations, while millennials tend to prefer urban living, and even if they are among the relatively few of their peers who could afford to buy a home, home ownership is less important to them than it was to their parents and grandparents as young adults. So … if you don’t have a car, and you don’t have the money or interest to stock up on two years’ worth of paper towels or mustard, and you wouldn’t have the space in your apartment to store this kind of stuff even if you wanted to, then there’s not much sense in shopping at Costco…

In general, Costco’s plan to win over the younger generation seems to be in the taking of baby steps toward meeting their preferences as consumers, while basically just waiting until millennials grow up, buy cars, move out to the suburbs, and (fingers crossed) feel like a Costco membership works for their households. For the time being, Costco doesn’t work for young people simply because “you’re not going to stick big vats of mayonnaise and big stacks of toilet paper in a small apartment,” McAdams Wright Ragen analyst Dan Geiman explained to the Seattle Times. Still, Geiman applauded Costco’s efforts to woo younger shoppers. “Anything you can do to lower the age of your target market is going to be a positive in the longer term,” he said.

Based on some of the metrics mentioned in this story (such as the number of Facebook likes Walmart and Target have compared to Costco), American consumers don’t see big box stores all in the same way. Could the same thing be true for millennials? While there is some data suggesting a number of them want to live in more urban areas, this does not necessarily preclude abandoning all of the shopping patterns more commonly associated with a suburban lifestyle. Perhaps Costco is not as well known, their marketing to younger shoppers has been limited, and these younger shoppers don’t see much appeal in a warehouse sort of store (where is the cool factor in that – Target, in contrast is a chicer big box store and Walmart can be enjoyed ironically).

While companies need to have a broad case of customers, I wonder if Costco could still survive for quite a while, like the TV networks, in focusing on the bulge of older Americans who are also more likely to have larger houses.

A “single lifestyle” the primary factor in making a city one of the worst for singles?

A recent list of the “10 Worst Cities for Singles” uses this criteria:

How did we come up with our list of the worst cities for singles? We started by looking for metropolitan areas with more than 125,000 people. Then we penalized places with small populations of singles, including the never-married, divorced and widowed. The share of unmarried residents in each of these bottom-ten cities is well shy of the national average.

Financial indicators didn’t boost the cities’ attractiveness. Although many of these areas boast below-average living costs, paychecks typically are way below average, too. We also factored in education level, keeping in mind that people with bachelor’s and advanced degrees are more likely to be gainfully employed. After all, you can’t exactly rock the single lifestyle without the earnings to fund it.

So there two primary factors in this analysis:

1. The number of single people. Presumably this has something to do with an exciting social scene, a la the culture and scene sought by the creative class. However, just measuring the number of single people doesn’t necessarily signal a more or less exciting cultural and entertainment scene.

2. The financial indicators are mainly about income, suggesting that single workers don’t want to be in places without high incomes. Does this mean younger workers only want higher-paying jobs? Is a high paying job the number one goal? The last line in the second paragraph above drives this point home: younger workers want a flashier “single lifestyle.”

All this seems to make some assumptions about single workers: they want high incomes, they want other singles around, and they want to “rock the single lifestyle.” While this may be the case for a number of them, it does highlight some different reasons for moving that are fairly accepted in American society today:

1. Economics. People need jobs. They should move where the jobs are. Young workers are particularly assumed to be more mobile and willing to move.

2. Finding exciting cultural centers. Places like Austin are held up as cities where one should move to enjoy life.

Are there other acceptable reasons for choosing where to live?

Argument: trends suggest younger Americans won’t experience the dream of homeownership

Dr. Housing Bubble argues young Americans may not be able to achieve the American ideal of owning a home:

Many young Americans will be accustomed to paying their student debt and rents on a monthly basis while these income streams go into banks, many that own their property.  Not a bad situation if the market wasn’t rigged by banks where preference is given to large money and low rates matter little when the Fed has set a fuse to Wall Street to buy out large portions of real estate in the market.  Of course many will try to pretend that this is some sort of free market.  The housing market is fully subsidized and juiced to the gills and while this is going on, a younger generation gets older and their dreams of homeownership move further and further away.  At least they can bunk with mom and dad and enjoy stories of those beautiful golden real estate handcuffs.

There are several interesting assumptions going on here:

1. Homeownership is the better long-term option for the country and for individuals over renting or living with family. This is tied to ideas about independence and achieving the American Dream as opposed to renters or those who live with family who can’t be self-reliant and don’t care as much about their property.

2. Younger Americans should aspire to homeownership. They may not as much in the future as owning home creates a significant financial obligation, may prevent the mobility needed to chase jobs or other opportunities, and may not be as exciting as other consumer options (new technologies, entertainment/cultural/travel options, etc.).

3. The difficult economy where a majority of Americans can’t make significant financial progress will necessarily continue and limit the number of people who can buy homes (and the number of new homes that are built). We’ll have to wait and see how this turns out. If anything, this all reinforces how big the housing bubble was in the mid-2000s.

Can car-sharing spread to older Americans?

The Christian Science Monitor asks whether the phenomenon of car-sharing will spread beyond young adults:

But there are limits to the model. Car sharing caters to a fairly limited demographic – namely, educated, Web-savvy urban dwellers in their 20s and early 30s with access to decent public transportation. “It’s narrow in terms of the overall driving potential,” Mr. Belzowski says.

Car sharing works well in a compact city with decent public transit like Boston or New York, but Belzowski points out that more sprawling US metro areas present a problem. “Many cities are designed for having a vehicle, and it’s difficult to move around those cities in a timely way unless you own a vehicle.”

Another obvious drawback: Car owners share with strangers at their own risk. “I had an issue with there being a lot of dog hair in one, and I found a dog toy in the back,” Hill says.

Even in car-share hot spots, having a car at your beck and call is not guaranteed. The number of available cars is still limited to the point that getting one during peak times, like weekends, requires advance planning. That could be helped as car sharing goes more mainstream – national rental car company Avis recently agreed to buy Zipcar for $500 million, a merger that should expand the company’s vehicle fleet. Other major rental car companies, including Enterprise and Hertz, are getting into the car-sharing game as well.

I’m not sure this article gives us much insights into what might prompt older adults to adopt car-sharing. Reading between the lines, here are a few hints from the article:

1. Older adults are more likely to live in suburbs while younger adults desire to live in the city.

2. Older adults are less willing to share cars with others.

3. Older adults would rather have cars available when they want them rather then having to more meticulously plan their driving schedules.

The first hint seems relevant: this would appeal most to people living in denser cities where owning a car is much more difficult. However, these second two reasons seem more flimsy and seem based on the idea that older adults simply aren’t used to the idea of car sharing. Reasons #2 and 3 could be related to having children.

One solution to the demographics is to simply wait for these younger adults to grow up and they will be already used to car-sharing. But, I suspect Zipcar and others would like to grow this category at a faster pace.

h/t Instapundit

Real estate firm survey: younger Americans still want to own a home

Even though a number of commentators have suggested younger Americans are not as interested in homeownership, a recent survey conducted by “Better Homes & Garden real estate brand” suggests this may not be the case:

Nearly all of them said they were willing to adjust their lifestyles to save for a home. Sixty-two percent said they’d eat out less. Forty percent said they’d work a second job. And 23 percent said they’d move back home with their parents to save money — they’re being strategic about saving money to own a home.

They also said that all of the media coverage of the housing crisis has taught them the importance of doing their research and planning, and they think they’re more knowledgeable about the process than their parents were at their age. But they want to be ready to own — 69 percent said that someone is ready to buy if they can maintain their lifestyle (while owning), and 61 percent agreed that the “readiness indicator” is if they have a secure job.

And even if these younger adults do want to own a home, the real estate industry has to be ready to appeal to this group:

Well, as an industry and certainly as a brand, we’d have to step up our campaign to show young buyers the importance of real estate as a long-term investment and lifestyle.

On a related note, something else also drove us to do this survey: the big disconnect in the average age of a first-time buyer (36), versus the average age of a real estate agent (56). This younger generation of buyers’ habits are different — they’re comfortable using technology, especially mobile devices, to buy and track everything, and agents need to learn this.

Several things are interesting here. First, it appears a good number of younger Americans do want a home but they are also more aware of what it will take to make it happen. If homeownership is such a big investment, younger Americans want to do their homework to know what they are getting into. This could mean that fewer people in this group will buy a home until they find a more “perfect” situation which might decrease the homeownership rate but it could also mean that those who buy a home are more committed.

Second, it is suggested that the real estate industry needs to stay relevant in the era of the Internet. Traditionally, real estate agents are necessary people in the middle who have expertise that the average homeowner would not have. But, potential homebuyers have much more information at their fingertips and if more people are selling their own homes, the real estate industry needs to continually show what extra value it offers. Also, this article hints at the aging of real estate agents: is this a desirable job for young people to pursue? If you look at a table of occupational prestige in the United States, real estate agent is at the bottom.

I wonder if the story for younger Americans and homeownership will be a bifurcated one based on socioeconomic status. Those with higher education and good jobs will continue to buy homes. Those who don’t have college degrees and/or struggle to find a good job may not have the option to do so.

In buyer’s market, some skipping the starter home and buying the big home first

With lower mortgage rates and housing prices, some young buyers are buying the big home as their first home:

Real estate agents say more twentysomething, childless buyers are snapping up sprawling homes instead of starting out small. It’s a trend that’s gaining momentum as young buyers seize on some of the best housing deals in history. While the shift is unlikely to kick-start construction of new subdivisions filled with McMansions, it’s helping to revive sales of midpriced and upper-bracket houses. The Simonses, for instance, initially planned to spend about $200,000 on a townhouse, but ended up spending tens of thousands more once they started shopping…

Clearly, most first-timers don’t have the financial muscle to buy their dream house, but with rents on the rise, the Simonses and other young buyers face stiff competition from investors who can pay cash for inexpensive properties they can use for rentals. During August, the inventory of houses priced at less than $140,000 fell 40 percent, while those priced at more than $300,000 fell half as much, according to the Minneapolis Area Association of Realtors…

This shift to larger homes runs counter to buying trends in recent years that showed higher demand for smaller houses. When the recession hit, many builders decreased square footage and touted their homes as more efficient and economical for buyers.

But Walter Maloney, spokesman for the National Association of Realtors, said many of today’s buyers are realizing that it could take many years to gain enough equity to trade up to a costlier house, so many are planning to stay longer. Last year, the typical buyer expected to be in their house 15 years compared with 10 years in 2010, he said.

So is this a good decision or not? As we are still trying to recover from a housing crash, it may be easier to now buy a larger house. However, these purchases echo two ideas that are often credited for getting us into this housing situation in the first place: people spending more money on houses than they should (even if they are more “affordable”) and people buying unnecessarily large houses. Indeed, there are some who would argue these two things should be avoided even in the best of times.

The last part of the quote above is also interesting: are we settling into a period where Americans are expecting to be less mobile? Some data from recent years suggests the recession has slowed mobility but people are making certain decisions now as well as developing mindsets that could change mobility for years to come.