The trend for buyers to target multigenerational homes is being accelerated by the pandemic, as families bring older relatives into their households and younger adults move back home.
Due to this, families are pooling financial resources to conserve money and accommodate more people in a single home. And housing experts say this trend is likely here to stay, at least for the foreseeable future.
About 16% of buyers have opted for a multigenerational home since the start of the COVID-19 pandemic, compared to 11% the previous year, according to data from the National Association of Realtors.
“One in six home buyers who purchased during the pandemic purchased a multigenerational home,” Jessica Lautz, the NAR’s vice president of demographics and behavioral insights, told realtor.com. “That’s an increase from 1 in 10.”
The NAR’s data shows the most common reason for a multigenerational home this year was to care for and spend more time with older parents, followed by cost savings and ability to pool several incomes.
What’s different about multigenerational homes? They may offer a separate entrance and a private kitchen from the main part of the house, like an accessory dwelling unit. Or homes may have two owner’s suites or be big enough that family members can spread out. Other features may accommodate specific needs.
“In our research, we found two key things to make multigenerational housing work better … separate entrances and separate kitchen facilities,” John Graham, co-author of All in the Family: A Practical Guide to Successful Multigenerational Living, told realtor.com.
Homebuilders have been responding to the demand for multigenerational buildings in recent years. For the last five years, Lennar Corp. and Toll Brothers have been constructing homes with two separate entries that include separate kitchens and living spaces.
Multigenerational homes tend to be larger, by nearly 22%, according to NAR data. A multigenerational household averages about 2,290 square feet and costs about 10.7% more, coming in at $299,000. For comparison, the typical existing home is about 1,800 square feet and costs $270,000.
Builders aren't keeping up with new home demand
Sales of new homes decreased from October to November due to several headwinds for builders, even though demand remains high.
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Data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau last week said sales of new single-family homes fell by 11% in November compared to the month before. But despite the monthly dip, new-home sales are still 20.8% higher than a year ago.
“Though the market remains strong, the pace of sales pulled back in November as inventory remains low and affordability concerns persist as builders grapple with a shortage of lots, labor, and building materials,” said Chuck Fowke, chairman of the National Association of Home Builders.
“The home building industry saw a historic gap between the pace of new-home sales and construction of for-sale single-family housing this fall,” adds Robert Dietz, the NAHB’s chief economist. “As a result, the pace of new-home sales was expected to slow to allow construction to catch up. This appears to have occurred in November as inventory of completed, ready-to-occupy new homes was down 43% compared to November 2019 at just 43,000 homes nationwide.”
Inventory increased slightly in November to a 4.1-month supply, with 286,000 new single-family homes for sale. That is 11.2% lower than a year ago. Also, of that inventory, only about 43,000 are completed.
The median sales price of a new home in November was $335,300. A year ago, the median price nationwide was $328,000.
On a year-to-date basis, new-home sales were up annually in all four major regions of the U.S., led by a 28.2% uptick in the Northeast. The Midwest posted a 24% increase, followed by a 20.5% increase in the West and 16.9% in the South.