The jolt of the recession affected the housing market in many ways, but a 2016 study says that one of those effects may become a longer-term housing market trend. In the economic downturn, adults lost their homes and adult children “boomeranged” home after college, and for some, living with multiple generations under one roof became commonplace. But as the economy has rebounded, multigenerational homes have become even more popular, stimulating a brand new market that is much more than a guest bedroom for in-laws over the holidays.
A record 60.6 million people lived in a multiple generation household in 2014, according to the Pew Research Center. That’s 19 percent of the American population. In 2009, the year the recession ended, multigenerational households comprised 17 percent of American households. Three years later, that percentage grew to 18 percent.
What is a multigenerational household?
The Pew Research Center defines it as a household that includes two or more adult generations or skipped generations like grandchildren living with grandparents.
When it comes to homes, the terms “multigenerational” and “multi-family” are often used interchangeably, but there is a big difference. A multi-family home includes two or more living quarters within the same structure (like a duplex or townhome).
A multigenerational home accommodates several generations under the same roof with no major division between living spaces. Public areas like the kitchen, living room, etc. are typically shared in multigenerational homes.
Why is multigenerational living trending?
During the recession, adult children living with parents or vice versa made a lot of financial sense. Many Americans are still shacking up with family even though the brunt of the recession has mostly ceased. Despite multigenerational living being more prevalent amongst certain cultural groups, the numbers are trending amongst all ethnicities, races and ages, according to Pew’s research.
Many Americans have invested in this mutually beneficial trend to allow them to:
- Cut down on the costs of visiting family
- Have extra hands for childcare (i.e. grandparents taking care of grandchildren)
- Accommodate aging parents without the costs of assisted living
- House adult children paying off high student loan debt
- Have the “it takes a village” experience
How is it affecting the housing market?
Multigenerational living is not for the faint-hearted. Accommodating the needs and wants of multiple generations can be trying when it comes to privacy, boundaries and financial input.
From home additions to complete custom homes, the trend has spurred a completely new market for homebuilders who specialize in designing and building multigenerational homes, whether they are for current or future use.
What’s available for financing a multigenerational home?
Financing a multigenerational home is heavily dependent on the type of homea borrower wishes to purchase. Loan types vary depending on whether a home purchase is a single family home or a multi-family property, such as a duplex.
In 2016, Fannie Mae introduced a new mortgage product called HomeReady, recognizing the need for specialized financing for multigenerational living. It does so by allowing extended-household member incomes to be used for mortgage approval. To learn more about the HomeReady program, click here.
Regardless, multigenerational living looks like it’s here to stay for a while. Whether you’re looking to make an addition to your existing home or build or purchase a new custom home that accommodates your extended family, contact one of our mortgage bankers to learn more about your financing options.
For more information about loan options in general, download our free Mortgage 101 Handbook for loan options on single-family or multi-unit properties or download our Rehab & Construction Guide for ways to incorporate the costs of making your home more multigenerational-friendly into your mortgage.