How Economic and Demographic Factors Effect Multifamily Housing
A range of demographic and economic drivers are currently aligning to create what a recent infographic on ALEX Chatter calls a ‘perfect storm of multifamily demand’. Investors who are on the fence about entering the multifamily arena should take note, as a marked shift in the way Americans live is changing the face of housing as we know it.
First, there’s the population growth.
Over the next decade we will see the U.S. population increase by 24 million. Our population is getting both older and younger. In 2024, for example, there will be 12.3 million more households aged 60 and over, and 4.1 million households aged 18 to 44 than there are today. Individuals on both ends of the age spectrum that would traditionally own homes are choosing to rent. Baby Boomers are downsizing into apartments in favor of a walkable lifestyle. Millennials, as we all know, also favor of the freedom afforded by apartment living. But aspiring homeowners can’t necessarily afford a home.
While rents have increased significantly in recent years, incomes have remained stagnant since the mid-1990s. This has made it difficult for Millennials to save for a down payment on a home loan.
Another reason for the uptick in apartment demand is that Millennials are pushing off household formation. A growing focus on advanced education is playing a role. The number of people obtaining a bachelor degree or higher has increased 10% from 1990 to 2014. With more degrees comes more student loan debt. It might come as a surprise that the average class of 2015 graduate has $35,051 in student loan debt — a significant number that many will try to eliminate before saving for a down payment begins.
Combined, these demographic and economic factors are expected to push down the homeownership rate even further. The Urban Land Institute, for instance, predicts that the homeownership rate will drop from 63.5% today to 61% in 2030. That means that nearly 40% of the nation will be living in apartments.
For more stats on the changing housing market — such as the sentiments of renters who recently had their rent increased — be sure to view the whole infographic on ALEX Chatter.