SS260: How Demographics Are Driving Demand for Apartments

SS260: How Demographics Are Driving Demand for Apartments

New demographic shifts are driving the strong demand for apartments. In this episode, Charles discusses the combination of factors contributing to the increase in renter households.

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Talking Points:

  • Demographic trends have been shaping the demand for apartments and multifamily housing throughout the United States. As these trends evolve, they are changing who is renting, why they are renting, and what it means for real estate investors.
  • Here are the key factors fueling multifamily housing demand:
    • 1. Generational Shifts:
      • A significant number of millennials in their 30s and 40s still rent. 
      • Gen Z in their 20s are entering the workforce and are predicted to be the biggest generation of renters in the next decade. 
      • Baby Boomers are downsizing from single-family homes and moving into senior living communities and apartments for convenience and lower maintenance.
    • 2. Delayed Homeownership Trends
      • The rise in home prices since 2020, along with higher mortgage rates, is making home ownership more difficult for many households, making them longer-term renters.
      • Younger professionals enjoy the freedom of renting for career mobility, flexibility, and the ability to live in sought-after urban and suburban areas.
    • 3. Household Formation Changes
      • There are more single-person households and childless households, which are pushing more multifamily housing demand.
      • Divorce rates and people delaying marriage are also increasing the number of single-person households.
    • 4. Urban and Suburban Growth
      • It is typically easier and less expensive to rent in popular urban and suburban communities than to buy. 
    • 5. Lifestyle Preferences
      • Many renters, across a wide range of age groups, value flexibility and convenience over homeownership responsibilities.
      • Renters by choice and not necessity, including the millionaire renter, make up a growing share of rental demand.
      • Owning a home is more expensive than renting and is more time-consuming. Yes, if you go on social media, every real estate agent will tell you that purchasing a house is less expensive than renting, and it’s the best investment in the world, and you cannot become wealthy without buying a home. This is just marketing BS. Possibly, your mortgage payment might be less than your monthly rent, but then tack on everything else. The repairs, the updating and renovations, the furniture, the new deck and patio, the landscaping, etc. All of this money is being invested in something that provides no return for years, or if ever. Just ask any person who owns a home and see what they spend their weekends doing and what repairs they have done lately.
    • Economic and Social Changes
      • Many people are in debt. Student debt, auto loan debt, and/or credit card debt.
      • Home prices and interest rates are still relatively high when compared to pre-COVID era pricing.
      • Aging baby boomers might find life easier in a senior-friendly community versus a single-family house.
      • I recently read an article stating that many people in their 20s, 30s, and 40s are more focused on investing than purchasing a home, as they see it as a better route to wealth.
  • In summary, the apartment market is being redefined by young adults delaying homeownership and older adults choosing to downsize. Both situations are contributing to a long-term demand for multifamily housing.

Transcript:

Charles:
What if I told you that both Gen Z and baby boomers are driving the same rental boom, but for completely different reasons. Over the past few years, we’ve seen a shift in sentiment in the us, and home ownership is no longer the American dream. Flexibility is welcome to Strategy Saturday. I’m Charles Carillo, and in today’s episode we’re breaking down how demographics are driving demand for apartments and what this means for investors across the country. Demographic trends have been shaping the demand for apartments and multifamily housing throughout the United States, and as these trends evolve, they’re changing. Who is renting, why they’re renting, and what this means for real estate investors. So here are the key factors fueling the multifamily housing demand. Number one are generational shifts. So a significant number of millennials in their thirties and forties still red and Gen Zs in their twenties are entering the workforce and are predicted to be the biggest generation of renters in the next decade.

Charles:
Baby boomers are downsizing from larger single family homes and moving into senior living communities and the apartments for convenience and lower maintenance issues. Number two are delayed home ownership trends. So the rise in home prices since 2020, along with higher mortgage rates, is making home ownership more difficult for many households, making them longer term renters, younger professionals enjoy the freedom of renting for career mobility, flexibility, and the ability to live in sought after urban and suburban areas. Number three is household formation changes. So there are more single person households and childless households which are pushing more multifamily housing demand divorce rates, and people delaying marriage are also increasing the number of single person households. Number four is urban and suburban growth. So it is typically easier and less expensive to rent in popular urban and suburban communities than to buy. And number five is lifestyle preferences.

Charles:
So many renters across a wide range of age groups value, flexibility and convenient over home ownership responsibilities. Renters by choice and not necessity, including the new millionaire renter, make up a growing share of rental demand. And owning a home is more expensive than renting and is more time consuming. Yes, if you go on social media, every real estate agent will tell you that purchasing a house is less expensive than renting, and it’s the best investment in the world. And you cannot become wealthy without buying a home. And this is just marketing bs. Possibly your mortgage payment will be less than your monthly rent, but then you tack on everything else that everybody always forgets about the repairs, the updating, the renovations, the furniture, the new deck, the new patio, the landscaping. You know, all this money is being invested in something that provides no return for years or if ever, and just ask any person who owns a home and see what they spend their weekends doing and what repairs they’ve done lately.

Charles:
Another part of this is the economic and social changes. So many people are in debt, student debt, auto loan debt, credit card debt, and home prices and interest rates are still relatively high when compared to pre COVID era pricing. Aging. Baby boomers might find life easier in senior friendly communities versus a single family house. And I recently read an article that many people in their twenties, thirties and forties are more focused on an investing than purchasing home as they see it as a better route through wealth. In summary, the apartment market is being redefined by young adults delaying home ownership and older adults choosing to downsize. Both situations are contributing to long-term demand for multifamily housing. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments and substantial share topics at globalinvestorspodcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs at syndicationsuperstars.com.

Charles:
That is a syndicationsuperstars.com. Look forward to two more episodes next week. See you then.

 

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