Homeownership has been one of the largest financial milestones for Americans and is a symbol of economic stability and success. However, 2023 saw one of the slowest years for home purchases in three decades with Americans dealing with high mortgage costs due in part to growing interest rates. With inflation cooling and the job market slowing in recent months, the Federal Reserve’s short-term interest rate hikes appear to have done their job. Now, analysts are anticipating rate cuts as early as next month to jumpstart the economy, and those changes could create a new wave of homeownership should long-term treasury yields follow through.
The housing market slowdown has broad implications for consumer brands, not only in general merchandise and durable goods but also for consumer behavior in the food service industry and CPG space. As Millennials set the next wave of homeownership as they raise Gen Alpha, understanding their preferences and priorities will be crucial for companies to stay resilient. Numerator has compiled insights on overall homeownership, houseware & home improvement trends, purchasing behaviors of current homeowners, and what to expect from younger Americans.
Home & Loan Ownership Trends: Which generations are the biggest homeowners?
Homeownership trends vary significantly across generations. First off, Gen Z and Millennials have lower rates of homeownership, with just over half of Millennials (55%) and a third of Gen Z (35%) owning homes. This trend moves differently with Gen X and Baby Boomers, where over 7 in 10 own homes (71% and 80%, respectively).
While most households live in single-family homes, this preference increases with age. Only 54% of Gen Z live in single-family homes, compared to 66% of Millennials, 75% of Gen X, and 78% of Boomers. Younger generations are more likely to reside in multi-unit complexes or alternative housing arrangements. For example, Gen Z is more likely to live in 5+ unit complexes (15%) or shared living spaces (4%) compared to Boomers. With younger generations more likely to live in complexes that often use HOA fees for maintenance and communal spaces, brands could expect less focus on outdoor categories and invasive home improvement projects.
Among homeowners, three out of four Millennials (74%) have a mortgage—the highest rate of any generation—compared to 67% of Gen X and 43% of Boomers. A likely reason for a slower housing market is that renters do not have as much disposable income to spend on a mortgage. In fact, renters are 20% more likely to carry other loans and debts compared to homeowners. Renters are over four times more likely to have payday loans (8% compared to owners at 2%), with Gen X driving this trend, and are 78% more likely to have student loans which is primarily driven by Millennials and Gen Z. With potential policy changes on certain loans post the 2024 election along with the Biden administration pushing for student loan forgiveness, brands may see younger households allocate more income toward home purchases should other debts lessen.
In-Home and Out-of-Home Tradeoff: How does homeownership affect consumer behavior?
Although homeownership is a sign of financial prosperity for many Americans, it is often accompanied by substantial financial obligations as 48% of homeowners currently hold a fixed-rate mortgage. In mid-2023, the average mortgage payment consumed over a third of household income. While this may lead to tighter wallets and reduced spending on experiences and dining out, it doesn’t necessarily spell a decline in consumer goods and general merchandise.
Numerator’s analysis of purchasing behaviors among middle-class homeowners with four household members and has children, compared to renters with the same profile, revealed three key trends:
- Homeowners spend 36% more on home appliances and decor and 72% more on tools & home improvement than renters.
- Grocery spending among homeowners increased by 4% while spending on limited-service restaurants dropped by 8% compared to renters.
- eCommerce spending across all consumer sectors rose by 14% among homeowners versus renters.
As the housing market continues to fluctuate, business leaders across consumer sectors should monitor these trends to anticipate changes in at-home consumption and purchasing behavior within the home industry. If home purchases increase, consumer packaged goods brands could experience tailwinds, while a sluggish housing market may bolster limited-service restaurants.
Generational Divides: What are the top trending home improvement retailers in the US?
Where consumers shop for home appliances, decor, and improvement products vary by generation. About one-fifth of home merchandise spending (21%) among US households occurs online, with Millennials leading at 27% of their spending online, followed by Gen X and Gen Z (21%). Despite their digital-native reputation, Gen Z’s online spending is underdeveloped, necessitating retailers and brands to continue in-store marketing and activation efforts.
Generational differences also exist among retailers. Gen Z spends the most at Walmart (18%) for home merchandise, while Millennials, Gen X, and Boomers lean towards Home Depot. Additionally, Millennials lead in spending on Amazon’s eCommerce platform at 15%. Lowe’s and Costco round out the top five retailers, with Lowe’s gaining market share as households age.
Notably, Gen Z allocates significantly more of their spending to Target and Costco than Boomers, while Millennials spend nearly twice as much on online home improvement purchases. The likely reason for this is that Gen Z is the least likely to buy home improvement products for their own DIY projects. Instead, Gen X is Generation DIY as over half of Gen X’ers (52%) consider themselves DIY’ers.
Consumer Response: Is sustainability an important home improvement trend?
Sustainability is another critical consideration for brands in the home industry as part of long-term planning. As efforts to meet ESG targets and reduce carbon emissions intensify in the next decade, brands must understand how sustainability can drive consumer demand for more sustainable products to meet those goals.
In a recent Numerator survey asked among purchase-verified buyers of home & garden and home improvement products in the past six months, over half of Americans (55%) consider sustainability important when renovating, remodeling or redecorating their homes. Millennials are the most likely to value sustainability, followed by Boomers, who account for 60% of home appliance, decor, and improvement spending. Brands today must act now to cater to existing shoppers who prioritize sustainability. However, brands and retailers will also need to educate Gen Z on the importance of sustainability within the home industry, as only 43% consider it very or extremely important to maintain relevancy in the future.
The Future of Home Purchasing: What keeps Americans from purchasing homes?
Nearly half of American renters are interested in buying a home within the next 12 months, with 40% of prospective buyers actively searching. Millennials show the greatest interest in purchasing (57%), followed by Gen Z (46%). However, numerous obstacles stand in the way.
While high interest rates on mortgages take center stage in housing market news today, the primary reason renters cite for delaying home purchases is the high absolute cost of real estate (42%). The reason is that the median sales price of U.S. homes has risen by 30% over the past four years, while average hourly earnings for private employees have only increased by 18% during the same period.
Understanding the trajectory of home purchasing and anticipating shifts in willingness to purchase a home is important for home improvement and decor brands. Renters and homeowners focus on different aspects of home improvement and renovations, influencing retail assortments. One example is that homeowners are twice as likely to have made exterior home improvements, such as landscaping and decking, in the past year. Renters, on the other hand, are 20% more likely to focus on furnishings and decor, with glassware, drinkware, and clothing & closet storage among the top-growing categories for renters. Leaders should consider applying sentiment trends with purchasing behavior to their modeling to forecast demand better.
