Multigenerational Households Are on the Rise. Is the Housing Industry Reacting Fast Enough?
More American households are becoming multigenerational, and home builders are beginning to respond.
In CNBC coverage, Diana Olick covers home builder Lennar’s “NextGen” home. “NextGen” is Lennar’s way of providing two living spaces under one roof. This solution, created with multigenerational households in mind, is performing well for Lennar. Olick reports “NextGen” sales grew 24 percent in the third quarter of 2014.
A survey by John Burns Real Estate Consulting found that 44 percent of home shoppers would like to accommodate elderly parents in their next home. And 42 percent plan to house adult children.
These results align with findings published last month in a paper by Fannie Mae Senior Economist Walter Scott. He found that 21 percent of U.S. households in 2013 were extended family. The low for multigenerational households in the U.S. was 12 percent in 1980.
Why Multigen Is ‘In’
Olick reports that the number of extended family households is increasing for many reasons.
Many Millennials are living with their parents as they postpone marriage or recover from the recession. Some baby boomers are moving in with their children.
Plus, some immigrants to the U.S. are coming from parts of the world where “multigenerational living is usually the rule,” Olick says.
Home builders responding to the uptick in extended families living together was highlighted in coverage of this year’s International Builders’ Show.
Even companies such as Fannie Mae are recognizing the importance of the multigenerational household with the introduction of the HomeReady™ mortgage. “HomeReady challenges tradition by offering an innovative new feature that supports extended income households,” says Jonathan Lawless, Fannie Mae Vice President of Underwriting, Pricing, and Capital Markets.
With HomeReady, Fannie Mae allows for consideration of income from non-borrower household members in determining a borrower’s creditworthiness. For example, if your adult child pays rent for living with you, that income may be considered by a lender in determining whether or not to grant you a mortgage.
This income flexibility is offered without increasing a mortgage’s riskiness because a borrower’s credit risk assessment is unchanged. Borrowers must still meet Fannie Mae’s credit risk standards using only their qualifying income.
Stepping Up Nicely
Whether it’s a mortgage that considers today’s household formations or housing plans with separate entrances (called “a must” by Olick), main-floor bedroom suites with private kitchenettes and living spaces, and even separate outdoor spaces, it’s clear the housing industry is scrambling to meet the needs of multigenerational families.
“The idea is that the family can live under one roof, but not entirely together,” notes Olick.
Larger lenders aren’t the only ones responding. Pardee Homes, a regional builder in the West, offers “GenSmart,” a multigenerational home in various floor plans featuring four to seven bedrooms. “These private suites, a home within a home, offer private entrances and their own individual living, eating, and sleeping spaces,” writes Pardee in a blog post.
Smaller, local builders say they are getting more requests for these floor plans as well, according to Olick.
“I think everybody is jumping in,” John Burns of John Burns Real Estate Consulting, told Olick.
“In this industry, when somebody does something successful, everybody jumps in.”