Over the past several weeks, I have been thinking about the environment that will define homebuilding and real estate development as we emerge from the Great Recession.   The way that most developers and builders are currently organized, staffed, strategizing, and operating does not fully appreciate what that environment will be.   That fact will create peril for some and great opportunity for others.

This past week, I had the opportunity to see a presentation by Professor James Johnson, Jr. from the University of North Carolina-Chapel Hill on demographics and where new buyers will be coming from.   (By the way, he is a good and engaging speaker with a fascinating topic, if you know organizations looking for interesting material.)

What really came out was the fact that there are three mega-trends that will be with us for the next 30-40 years.  

The first is the graying of the predominantly white baby boom.    With what has happened economically to them already and what might be happening in the near future (fraying social security net, higher taxes and health care costs, to name a few), the prevailing assumptions about them may prove to be all or partially incorrect 

First, they will want and need to work longer, which will create some interesting job and employment opportunities for entrepreneurs.  

But it also means that the retirement trend will not look like the patterns seen since the 1960s.   They may be staying closer to their existing homes longer.   That is where the social fabric and job contacts are best.   That means that the Sunbelt retirement community trend might not be as big as people thought.   If they do move, there is a belief that more will move near where their kids are and seek work there.

Ultimately, more will move in with their kids (sorry, kids!), as not all will be able to afford assisted living or retirement community concepts.   That may drive more multigenerational homes and communities.  Will existing zoning be able to accommodate this possibility?  How about their kids?

The second is the browning of America.   The fertility rate for whites is at about 1.9 children per couple; less than the replacement rate.   Women working more, getting married later, and providing a larger portion of family income results in a shorter period to have children and, thus, fewer kids.  

On the other hand, the combination of immigration (both legal and illegal) and a higher fertility rate of 3.0 children per couple is driving the proportion of the Hispanic population higher and faster.   At 29% of the current population currently, they project to be 51% by 2050, and probably sooner.  

Asian families will remain as a relative constant percentage, but more and more will represent the most educated segment of the population and will enjoy the benefits of education and discipline.

The third is the echo baby boom, which is still predominantly white, but moving more toward multicultural.   This group has grown up in the suburbs, but values a more urban lifestyle and had very different cultural and material expectations than their parents.   In this group, women are becoming more educated than men and more highly paid, too.   What might that mean for housing?

Last week I focused on the echo baby boom and their wants, needs, and how to communicate with them.   When you superimpose the Hispanic wave and its relative youth on top of the echo-boomers and then add the needs of aging boomers, it means that builders and developers are going to have to deal with three simultaneous waves of potential demand.

Each of these cohorts has different needs, cultural patterns, and ways of accepting communication.   Unfortunately, most of our builders who have survived the Great Recession are built on a model of servicing the baby boomers.   The executives of these development and building companies mostly reflect the baby boom in color, age, and culture.   That creates peril and opportunity.

If organizations do that which they are organized to do, I fear that as an industry we are not equipped for this three pronged tidal wave that is starting to hit us.   A company run by and marketing to baby boomers will not easily transition to servicing either the Hispanic or multi-cultural echo boom markets.   The decision makers just will not get it.

The smart players will figure out how to set up separate companies within themselves.   They will be staffed by and organized specifically to market to these other broad market segments.   Different brand/company names, different websites, different ways of selling, different managers, different ways of communicating, and different languages may all be part of the new “sub-company” in order to take advantage of the wave.  

Adaptation will mean success.

At the same time, new companies will form to take advantage of these emerging market segments.   They will not be as well capitalized with money, experience, or systems are the current survivors.   However, they will succeed wildly if they embrace the new segments or existing companies blindly keep doing what they have been doing for the past several decades.

So the question is what camp will you and your company be in.   Will you adapt and figure out how to service multiple waves at the same time?   Will you focus on just one of the waves and do it superbly?   Will you do nothing and hope that the same old buyer returns when “normal” comes back?

The fruits of opportunity or the shipwrecks of peril ride on your answer.