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Demographic Trends Support Strong Multifamily Demand

By: Jillian Sutherland

Date: Aug, 15 2013

[caption id="attachment_2801" align="alignright" width="300"] Demographic and economic trends show that multifamily housing, like Homeword's 'Solstice" project pictured above, is likely to see steady, increased demand. Photo by Chris Chapman Photography[/caption] New housing construction is finally happening, and it’s mostly thanks to apartment buildings. The sudden surge of rental demand has some in the real estate community concerned that multifamily housing is just the next “bubble” in the market that will inevitably pop in a few years time. RCLCO, a real estate advisory firm out of Washington D.C., is speaking out against the bubble theory in a recent report on the important demographic trends that are influencing this new demand. The firm is saying there are two key demographic trends at play that are driving the multifamily housing demand beyond what typical population growth would require, both of which have no indication of slowing down anytime soon. Importantly, RCLCO isn’t talking about duplexes and townhomes. They are talking about multifamily buildings that have five or more units per structure: true condominium or apartment buildings. The first trend is the pent-up demand for multifamily housing that was dormant during the recession, when young people who were unable to find work were forced to remain living with their parents. This lack of “new household” formation prevented the absorption of multifamily housing stock.  As the labor market recovers, these individuals will most likely be looking for this kind of housing en masse. These new households will continue to form well into the future, as Generation Y continues to grow up. They are the largest demographic cohort, currently boasting a population of 72 million. That’s a lot of new housing demand – much of which is expected to be multifamily. The second trend is the stark decline in the marriage rate among Americans. The rate of single and unmarried households has drastically increased and will likely continue to increase over the coming years. This indicates a greater demand for multifamily housing as well, as single and unmarried households typically show a greater propensity for this type of housing than their married counterparts. The chart below shows how drastically marriage rates have declined over the past 30 years. [caption id="attachment_2797" align="aligncenter" width="540"]Marriage rates in the USA. Marriage rates have shown an unambiguous trend, as shown above.[/caption]   The charts below show how significantly this trend drives multifamily housing demand.  Interesting to note, however, is that in recent years the preference has risen among both for some age groups, most notably between the ages of 25 and 44. [caption id="attachment_2799" align="aligncenter" width="540"]Multifamily preference rates Multifamily preference rates[/caption] RCLCO does warn in their report that these are national trends, meaning they could look different in your particular community given the kind of housing stock currently available.  Some indicators that your community may be short on multifamily housing include: high rent rates, lack of affordable housing, or low rental vacancy rates. You can get a lot of this information from the American Fact Finder supplied by the United States Census. Spend some time doing a bit of gum-shoe detective work about your community. Knowing what kind of housing your community’s population may be looking for in the future can help it to get ahead of the curve. Then tune in to our upcoming webinar next week that will focus on HOW to achieve a more diverse housing stock in your community.


By: Jillian Sutherland

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