A NEW PERSPECTIVE ON HOUSING DEMAND: The Next Las Vegas Boom

Implications:      The NAHB has predicted that the real estate downturn will bottom in the first or second quarter of 2008. Several recent studies have indicated that the balance in housing “fundamentals” may be slowly returning to normal.        These studies concentrate on supply and demand. Virtually all of them correctly analyze supply. Virtually none of them correctly analyze demand.            Changing demand is a major reason why Las Vegas may very well be the first market out of the housing slump. It is also the reason why some major builders may not recover as quickly as the NAHB has predicted.           In the 1980’s, a home entertainment center was required to sell a home. In today’s market, the home must be in the center of “entertainment” to be sold.

Analysis:         Every housing study looks at job growth as an indicator of future demand. Most also identify in-migration patterns as a factor in housing growth. These are correct, but insufficient measures of demand.
        None of them take into account the nation’s changing demography. Simply put, builders are creating product for a market that no longer exists.  Builders continue to create product for the nuclear family in the belief that the American Dream is still that little house in the suburbs with the white picket fence. 
        Actually, today’s American Dream is a home in which the resident(s) can put up the car keys on Friday night and not take them down until Monday morning.
        Here are the simple facts:

    (1 )    The US Census Bureau indicates that  less than one in four of the US  population are in a nuclear family.  
   
    (2)    86 million adults in this country are single.

    (3)    More than half of adult women (51%) are single. And, according to NAR, they account for more than 22% of all home sales. In Las Vegas, Marketing Solutions’ consumer research pegs the figure at more than 30%.

    (4)    Over 40% of women in their childbearing years have no children. That number has been climbing steadily over the last decade.

        The US residential market has been slowly – too slowly – urbanizing. The trend to urbanization encompasses more than a return to city’s inner cores. Even the “suburbs” are being urbanized with what we have dubbed “Entertainment Villages.”
        Entertainment Villages, the next iteration of Urban Villages, integrate more than just retail and residential. These communities recognize the need for restaurants and attractions for residents. After all, since 1965, the US consumer has gained the equivalent ofmore than  two weeks of free (leisure) time. They need somewhere safe and close to spend that free time …and  be entertained.
        Beyond that, the new urbanization trend is a response to builders’ lack of foresight.   For example, consider these three statistics:

    (1)    One third of the American labor force works from home.

    (2)    That includes 16.5% of those who work for corporations.

    (3)    It also includes another 17.2% of those who are self-employed and work from home.

        And, virtually anyone who works in a corporate situation today has a home office. So, ask yourself this question: Why don’t builders dedicate a special small room for a home office in their models?
        Why are we still building kitchens in which no one can cook? 
        Perhaps the simplest offence to overcome is the lack of closet space. Consider this: In 1955 the average American woman owned four pair of shoes. Today that number exceeds 16. Yet, closets appear to be smaller. And, builders rarely offer closet organizers as a standard feature.
        Builders still create a TV niche, although today we have flat screens.  The list goes on and on.
        Beyond subprime and affordability issues, we need to address obsolescence in building design.