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In a presentation at a REALTOR® University Speaker Series held recently,[1] Dr. Jordan Rappaport, Senior Economist of the Federal Reserve Bank of Kansas City, discussed the demographic trends and preferences of millennials and baby boomers that has driven multifamily housing demand since 2000 and in the coming decades.
According to Dr. Rappaport’s research, young adults (ages 20-34) drove the strong rebound in multifamily construction in 2007-2013, but it is the older adults (ages 50-59) who have accounted for the increase in occupancy from 2000-2013. Young adults provided the rebound in multifamily demand as they swung back toward living in apartments (+ 500,000 units) following a shift away from apartments (-500,000) during the housing boom, but over the period 2000-2013, there was no net increase in demand from young adults. Meanwhile, older adults contributed relatively little to the construction rebound because of more stable demand for multifamily units, but accounted for most of the increase in multifamily occupancy from 2000-2013 of nearly 2.6 million units. (See Rappaport, Chart 1 below).
What factors explain the shift towards multifamily units? Among young adults, Dr. Rappaport notes a long-term trend of delayed marriages as well as the cyclical downturn in income growth since 2007. Among older adults, the long-term trends of improving health and longevity have pushed back the age at which older adults typically downsize from single-family to multifamily unit by twenty-five years since 1980. With nearly 26 million baby boomers projected to enter the age – 70 years – where this downsizing accelerates from 2015-2030, Dr. Rappaport projects that demand for multifamily units is likely to continue to increase over the next decade, peaking to about half a million per year (baseline scenario) in 2018-2020 (Rappaport, Chart 2).
REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate.
[1] The REALTOR® University Speaker Series on “Millennials, Baby Boomers, and Rebounding Multifamily Home Construction” with Dr. Jordan Rappaport, Senior Economist, Federal Reserve Bank of Kansas City, was held on September 21, 2015.
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