Childless adults cause ripple effects in US housing market

By Adina Solomon / The Washington Post

Sara Moran’s closet in her Colonial house, built in 1920, once served as a nursery for a past homeowner. But Moran and her husband don’t need that nursery. They have no plans to extend beyond the confines of their two bedrooms and small yard in Stratford, Connecticut.

“Because we’re not going to have kids, I don’t really worry about having a big yard. Same with having more room,” she said. “We’re never going to have kids and ever feel like we’re going to be expanding.”

The fertility rate in the United States has fallen to its lowest levels since the Centers for Disease Control and Prevention began keeping records in 1909. The general fertility rate is the total number of births per 1,000 women age 15 to 44. According to provisional data, the rate last year was 62 births per 1,000 women.

The decrease in the number of people having children affects the real estate market and decisions.

“Clearly, it’s not a one-year change,” said Lawrence Yun, chief economist at the National Association of Realtors. “It’s been occurring throughout the years here in the U.S. and many developed countries [with] smaller family size, delayed marriages, fewer kids, so all these trends, and how does this impact housing or could impact housing for the long haul.”

In 2015, just over 70 percent of households had no children living there, a growth of three percentage points over 2011, according to the U.S. Census Bureau’s American Housing Survey.

The numbers grow starker when filtered by age. Compared with four years earlier, the number of people 25 to 29 years old and 35 to 44 who didn’t have kids in their household grew by more than 5 percent. The number of 30- to 34-year-olds without children rose by 4 percent.

Those statistics for people age 25 to 44 outpace the 3 percent growth in childless households across all age groups.

“The fact that we’re having smaller-size families I think naturally means that the demand for smaller-size housing would get greater interest than before,” Yun said.

Robert Dietz, chief economist at the National Association of Home Builders, said people generally look for 800 square feet of home per person in the household.

Moran said not many people want a two-bedroom house such as hers because they anticipate having children. But she and her husband, who bought their home in 2015, are content with their 1,200 square feet.

“Even our real estate agent said, ‘It’s going to be too small. You’re going to want to move,’ ” Moran said. “I kept saying, ‘Well, I’m not having children, so it doesn’t really matter.’”

Sam Keeney bought her two-bedroom, one-bathroom ranch house in April. She was looking for a condo, but she didn’t want to be too picky because real estate sells quickly in Nashville.

“I didn’t want anything large because being child-free, I’m not planning to need a house to grow into, but I did want some space to be able to have friends over and entertain,” Keeney said.

The house sits in an urban area closer to work and things to do.

“I wanted a neighborhood that still felt like a neighborhood, so not one of these that’s been replaced by putting two McMansions on the same lot situation,” she said.

About 90 percent of buyers with children younger than 18 at home bought a detached single-family house, according to the National Association of Realtors’ 2016 Profile of Home Buyers and Sellers. But for those without children at home, that number fell to 79 percent. Instead, more chose townhouses and condos.

Part of the reason for this trend, besides wanting less space, is people without children tend to prefer urban areas. Those desires go hand in hand.

“We’re seeing this trend in many metro markets, so clearly there is a consumer desire and preference for wanting to move closer to the city,” Yun said. “That’s generally associated also with smaller-sized homes because those big McMansions that are being built are typically out in the more distant suburbs where the land is plentiful.”

Buyers without children said their neighborhood choice was more influenced by convenience to friends, family, shopping and entertainment, according to the 2016 Profile of Home Buyers and Sellers.

This mirrors trends on the home building side. Builders have less land available to develop in desirable urban areas, leading to smaller yards and lot sizes, Dietz said.

“The appeal of the yard has slightly diminished relative to, ‘Oh, you can walk to the grocery store,’” he said. “You shouldn’t have to consume a gallon of gas to buy a gallon of milk, and I think that neighborhoods that avoid that kind of cost, particularly for millennials after their ‘having children years’ or if they don’t have children, just the ability to reduce those kinds of costs is going to appeal to all kinds of households.”

But Dietz said people still want a suburban feel.

Ksania Lerner said she prefers the suburbs. She and her husband bought their second home in 2016, renting out their original house. They live 30 minutes by car from downtown Houston.

“I love the suburbs personally because you have the right amount of privacy to be social with your neighbors. You’re not at each other’s neck,” Lerner said. “It’s just easier than the city, and it’s not too far from the city when you’ve got to go in.”

She owns a clothing design business, so she needed studio space to work from home. And like Keeney, Lerner and her husband also wanted a place to host guests. Their three-bedroom house includes a guest bedroom, a pool table and a pool.

Dietz said single-family housing starts to grow every year, but they are lower than expected, partially because of household formations. Because of lot shortages increasing construction costs, builders can find success in the townhouse market.

“These supply-side factors will dictate as much as the demand-side factors — in other words, changing demographics — what kind of homes are added to the market,” Dietz said. “In certain markets where you’re going to have an increase in the number of childless households, that does mean that maybe townhouse construction is a greater option than, say, homes that are approximately 3,000-square-foot, single-family detached.”

Yun said there isn’t as much construction of condos, which could fit smaller households and be closer to job centers. Demand for condos and townhouses will strengthen in the future compared to McMansions, which use too much land to remain cost-effective in most urban areas.

He said home builders should increase their use of infield housing, when homes are constructed on unused land in existing neighborhoods.

“They maybe need to think about how to build more creatively closer to downtown where the lands are limited,” Yun said.

In addition to where to buy, not having kids could affect when to buy, Dietz said.

“It’s more of a financial decision rather than trying to find the most cost-effective way of additional space for a growing family,” he said. “It becomes more of ‘Do I want to rent or do I want to own and establish roots?’ “

Yun said that in the 1980s, more people bought a home for the first time in their late 20s. Now that has crept to the early 30s.

“It’s not a big change from, say, late 20s to early 30s, but nonetheless, it is implying that the entry point of home buying appears to have pushed back by a few years just as the time when people get married has been pushed out, the time when they have a first kid has been pushed out,” he said. “All the demographic factors are moving in line with the time when people first start their home as well.”

Moran and Lerner were in their mid-20s when they bought their first home. Keeney was 35.

The decreased fertility rate in the United States also has a more far-reaching effect, Dietz said. The present dip in the number of children will affect real estate demand when they become adults.

“When today’s 5-year-olds become 25-year-olds in two decades, there’s going to be a reduced number of people in the United States looking for first apartments and then eventually single-family,” he said.

For now, as people approach their early 30s and fewer people have children, home builders must construct communities to reflect consumer preferences, Dietz said.

Experts agreed that there is demand for medium-density, walkable neighborhoods closer to city centers — and for smaller homes.

Moran and her husband chose their Colonial house in Stratford partly for the financial freedom to travel. They plan to eventually settle elsewhere, but not because they need more space. They want to live closer to her husband’s work near New York City.

“But it is crazy expensive, so we had to settle here,” Moran said. “We’re thinking maybe in a couple years of moving.”

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