Real Estate Matters
Generation same: Where Facebook kids and Baby Boomers are both pushing the housing market
When was the last time that 25-year-olds and 65-year-olds agreed on anything, let alone where it's cool to live? Isn't the generation gap supposed to protect us (and the status quo) from such unholy alliances?
Now, in real estate at least, it's time to think beyond the generation gap before it blinds us to current opportunities and dangers. Instead of moving in different directions, Baby Boomers and Millennials are both chasing a new American Dream that's much less about 5,000 square feet and a three-car garage and more about having artisanal bakeries and coffee shops within hailing distance of their Bauhaus-style balcony above their brushed-aluminum door.
The sun is setting on the mountaintop retreat in Los Altos Hills; at least that's what the Zeitgeist and the market are signaling. The appreciation in the median price in Los Altos Hills from 2003 to 2012 is 33 percent versus 89 percent in Palo Alto. Price increases are raging in neighborhoods like Palo Alto's Professorville and Menlo Park's Allied Arts where homeowners can easily walk or bike to restaurants, yoga studios, art galleries and schools.
Yes, grandpa and junior are saying the same thing: Go short on homes in the hills and long on condos and bungalows near anything that feels like a downtown. I don't think this intergenerational alignment is some brief eclipse of normal conditions. Rather, it's a long-term shift caused by the deep needs and beliefs of both generations.
The new young buyers — the 25-35 crowd — are far more interested in community than commodity. This Facebook generation is less materialistic, more sophisticated about design, more socially connected, more inclined to share what they're doing than what they bought, and more apt to take newfound wealth and start a company. They want to live in Palo Alto (or its like) and be in the mix — talking to people, going out and doing things. Long driveways don't make them sigh with longing; they make them yawn loudly. This generation's preferences in housing type, remodels, décor and location is showing up in the sudden popularity of transitional and modern architecture, along with a move away from traditional homes in distant cul-de-sacs, no matter how nicely landscaped.
To me, a long-time observer of mores, moods and the movers and shakers of the Peninsula, this shift toward a close-knit community and away from an expansive lawn on a large piece of land feels like a lasting shift. Why? Because — to use a transit metaphor — the mental infrastructure is already in place. The popularity of bicycling has been building for 10 years to the point where a 25-year-old doesn't see biking to work as revolutionary; he sees it as a very cool way to be sensible. It's the same with restaurants where local and sustainable have evolved into the highest values; valet parking your SUV is a bad way to start dinner.
Baby Boomers, for their part, are doing what empty nesters traditionally do: downsize. They're selling bigger houses with bigger lots and buying smaller homes. Some are simply cashing out to put retirement money in the bank, but many empty nesters, like Millennials, are vigorously pursuing a new lifestyle where the car sits there more while the car's owners walk there more. As these boomers see it, a smaller house in a pedestrian-friendly neighborhood equals a more satisfying life.
And don't think you're safe in moving out of our area, because this is a national trend. According to real estate research firm Zillow, the highest price per square foot in the Washington, D.C., metro area in the year 2000 was large-lot suburb of Great Falls, Va. Ten years later urban homes in the urbane Dupont Circle neighborhood of Washington cost 70 percent more per square foot than homes in Great Falls.
So if you're a boomer who thinks this pattern is in your future, you may want to jump the gun by making the move now. According to Pew Research Center the 79-million-member Baby Boom generation makes up 26 percent of the United States population and the first members turned 65 on Jan. 1, 2011. Since then and every day for the next 18 years about 10,000 boomers will be reaching the 65 milestone. That is a lot of houses sold and condos bought. The Boomers warmed up by making music rock and roll. Now they are going to do the same thing to real estate.
Michael Dreyfus founded boutique brokerage Dreyfus Properties, with offices in Palo Alto and Menlo Park, in 2000. He can be reached at email@example.com.