Popular opinion throughout the mainstream media, local government, and most people in the real estate development industry is that there simply aren’t enough homes on the market to satisfy demand. It’s a simplistic explanation as to why more people keep renting and home prices keep rising.But we believe there is a significant demographic shift currently taking place which fundamentally changes the future supply and demand for traditional owner-occupied housing.

Since post-World War II, owning a home was the Great American Dream. But this ‘dream’ is changing because of the choices the consumer is willingly making rather than being forced to make.

Here are three demographic trends that are reducing the demand for home ownership:

1. Younger generations are renting longer.

This is a trend occurring across all age, ethnic, and educational groups.

More than 65% of people younger than 35 years old rent where they live. White, black, and Hispanic ethnic groups have all seen a rise in renters over the past 10 years. People of all education levels are renting more, with households holding a bachelor’s degree or higher having the largest increase in renters.

2. Older generations are choosing to downsize and rent rather than be burdened with home ownership.

According to the U.S. Census Bureau between 2009 – 2015 people 55 and older accounted for the largest net increase in renters amongst all age groups. That’s about 2.5 million new senior households choosing to rent rather than own.

Kiplinger notes that some of the reasons seniors are deciding to rent after they downsize include predictable monthly expenses and no home maintenance, a flexible lifestyle with the freedom to travel, and the earnings that come from investing the equity from a home sale rather than buying another home that may decline in value.

The overall demand for rental housing is so strong that a recent report from Nareit notes that over last 10 years nearly 6.5 million single-family homes have been converted from owner-occupied property into rental units. There are more renters than homeowners in over 20 markets in the U.S. including Chicago, San Diego, and Austin.

3. Senior housing, assisted living, and retirement communities are becoming increasingly popular options.

The first baby boomers were born right after World War II and will soon be nearing the age of 80. The baby boomer demographic consists of over 70 million people and will make up around 20% of the U.S. population in about 10 years, according to the Population Reference Bureau and U.S. Census Bureau.

That’s why senior housing development and management is such a rapidly growing sector of the real estate industry.

A research report from the National Real Estate Investor expects the strong performance of senior housing investors to continue, with a large amount of inventory in the construction pipeline to meet demand.

Savvy senior housing operators understand that baby boomers aren’t like their parents. Attractive options such as independent living design, greater service offerings, and on-site specialty care services will attract consumers, while industry-wide marketing touts the value proposition of senior housing.


Read Reit Article Read RentCafe Article Read Kiplinger Article Read PRB Article Read NREI Online Article

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