The volatile U.S. multifamily housing market has returned to pre-recession investment levels, driven largely by Millennials putting off home-buying and settling for rentals, but in the long term it will be baby boomers that will drive the market as they downsize, according to the Kansas City Federal Reserve.
Millennials, those born between 1980 and 2000, have shown strong interest in apartments as the economy has recovered, partly because of a preference for city living but also because they are delaying marrying and having children due to debt and unemployment.
Kansas City Fed senior economist Jordan Rappaport wrote in a report that the share of young-adult households renting apartments in multifamily units decreased from 2000 to 2007 when looser mortgage credit standards and expectations of rising house prices made home ownership more attractive, but the share has since returned to normal levels.
Older Americans, meanwhile, are "increasingly downsizing" to apartments, generally beginning around age 70 and doing so more often by age 75, Rappaport wrote.
The oldest baby boomers will turn 70 next year, and the number of Americans aged 70 and older will increase by more than 20 million in the next 15 years, the Census Bureau projects.
"In consequence, multifamily home construction is likely to continue to grow at a healthy rate through the end of the decade and thereafter remain well above its level prior to the housing crisis," the report said.
Building permits for the multifamily segment soared 24.9% in May, and permits for buildings with five or more units reached their highest level since January 1990.
The report said that builders would need to adapt to the changing trends because while millenials lived in compact city spaces, older buyers tended to want more space and amenities.
(Reporting by Megan Cassella; Editing by Andrea Ricci © Copyright Thomson Reuters 2015)
Related Stories
MFPRO+ News | Nov 15, 2023
Average U.S multifamily rents drop $3 to $1,718 in October 2023: Yardi Matrix
Multifamily fundamentals continued to soften and impact rents last month, according to the latest Yardi Matrix National Multifamily Report. The average U.S. asking rent dropped $3 to $1,718 in October, with year-over-year growth moderating to 0.4%, down 40 basis points from September. Occupancy slid to 94.9%, marking the first decline in four months.
Industrial Facilities | Nov 14, 2023
Some AEC firms are plugging into EV charging market
Decentralized electrical distribution is broadening recharger installation to several building types.
MFPRO+ Special Reports | Nov 14, 2023
Register today! Key trends in the multifamily housing market for 2024 - BD+C Live Webinar
Join the BD+C and Multifamily Pro+ editorial team for this live webinar on key trends and innovations in the $110 billion U.S. multifamily housing market. A trio of multifamily design and construction experts will present their latest projects, trends, innovations, and data/research on the three primary multifamily sub-sectors: rental housing, senior living, and student housing.
Multifamily Housing | Nov 9, 2023
Multifamily project completions forecast to slow starting 2026
Yardi Matrix has released its Q4 2023 Multifamily Supply Forecast, emphasizing a short-term spike and plateau of new construction.
MFPRO+ News | Nov 1, 2023
Washington, D.C., Queens, N.Y., lead nation in number of new apartments by zip code
A study of new apartment construction by zip code showed Washington D.C., and the Queens borough of New York City are the hottest multifamily markets since 2018, according to RentCafe.
Adaptive Reuse | Nov 1, 2023
Biden Administration reveals plan to spur more office-to-residential conversions
The Biden Administration recently announced plans to encourage more office buildings to be converted to residential use. The plan includes using federal money to lend to developers for conversion projects and selling government property that is suitable for conversions.
Sponsored | MFPRO+ Course | Oct 30, 2023
For the Multifamily Sector, Product Innovations Boost Design and Construction Success
This course covers emerging trends in exterior design and products/systems selection in the low- and mid-rise market-rate and luxury multifamily rental market. Topics include facade design, cladding material trends, fenestration trends/innovations, indoor/outdoor connection, and rooftop spaces.
MFPRO+ Special Reports | Oct 27, 2023
Download the 2023 Multifamily Annual Report
Welcome to Building Design+Construction and Multifamily Pro+’s first Multifamily Annual Report. This 76-page special report is our first-ever “state of the state” update on the $110 billion multifamily housing construction sector.
Mass Timber | Oct 27, 2023
Five winners selected for $2 million Mass Timber Competition
Five winners were selected to share a $2 million prize in the 2023 Mass Timber Competition: Building to Net-Zero Carbon. The competition was co-sponsored by the Softwood Lumber Board and USDA Forest Service (USDA) with the intent “to demonstrate mass timber’s applications in architectural design and highlight its significant role in reducing the carbon footprint of the built environment.”
