Emerging generational forces are contributing to strong rental markets — and the outlook for apartment housing is good for years to come, according to a report in the current issue of Apartment Finance Today.
New Urban News has been reporting for several years on a demographic convergence that favors multifamily houses, small lot single-family houses, and other urban residential types. Top among the groups inclined toward more urban living arrangements was the Millennials, Generation Y, the biggest demographic group since the Baby Boom, now entering the housing market. It appears that this generation is now making its impact felt on the rental market.
“Throughout the recession, demographics have served as a beacon of hope to apartment owners. ‘Things may be bad now,’ went the refrain, ‘but just wait until Generation Y comes along,’ reads the report.
“Turns out, we didn’t have to wait long. The demographic trends that will shape the next decade arrived this year, with absorption rates so strong they turned conventional wisdom on its ear. A hefty 77,000 apartment units were absorbed in the first half of 2010, the strongest demand in a decade. But where did all of those renters come from?”
The report states that in 2009, the recession forced this generation to wait for housing. “Household formation totaled about 930,000 in 2009, the lowest mark in 30 years. Young adults increasingly doubled up, moving in with roommates or back in with their parents to ride out the recession. The number of those aged 18 to 34 living with parents increased by 2.2 million from 2005 to 2009, reaching 20.3 million, the highest number in 25-plus years, according to the Census Bureau.
“In 2009, the number of 20- to 34-yearolds grew by more than 800,000. Next year, it peaks with another 964,000 coming; and in 2012, 856,000 new young adults will join the prime renter age group, according to the Census Bureau and Moody’s Analytics.”
“Unlike the rapid suburbanization that characterized the post-World War II years, the coming decade will likely be what the Urban Land Institute calls “a great re-urbanization.”
Generation Y strongly prefers lively urban environments, which is contributing to “gentrification” of city centers like New York, Philadelphia, Chicago, Seattle, and Denver has made city living more palatable.
“ ‘There’s definitely a shift toward urbanism both by young professionals and renters by choice,’ says Ryan Severino, an economist at New Yorkbased Reis. ‘Many cities have gentrified. They’re cleaner and safer, and the amenities that have always been there are now much more attractive.’
“In fact, more than three-quarters (77 percent) of Gen Yers want to live in urban cores, according to a survey by Washington, D.C.-based research firm RCLCO. ‘They want to be close to it,’ says Mark Obrinsky, chief economist of the Washington, D.C.- based National Multi Housing Council.”
Baby Boomers are also contributing the rental market, the publication reports, ‘”thanks to the housing bust, during which many boomers lost their homes. In fact, the homeownership rate—which fell to 66.9 percent in the second quarter, down 1.6 percent since the beginning of 2006—is projected to keep falling. ‘It doesn’t sound like a lot, but 1.6 percent translates to 3.4 million households that are now renting,’ says Mark Obrinsky, chief economist of the Washington, D.C.-based National Multi Housing Council.”