The volatile U.S. multifamily housing market has returned to pre-recession investment levels, driven largely by Millennials putting off home-buying and settling for rentals, but in the long term it will be baby boomers that will drive the market as they downsize, according to the Kansas City Federal Reserve.
Millennials, those born between 1980 and 2000, have shown strong interest in apartments as the economy has recovered, partly because of a preference for city living but also because they are delaying marrying and having children due to debt and unemployment.
Kansas City Fed senior economist Jordan Rappaport wrote in a report that the share of young-adult households renting apartments in multifamily units decreased from 2000 to 2007 when looser mortgage credit standards and expectations of rising house prices made home ownership more attractive, but the share has since returned to normal levels.
Older Americans, meanwhile, are "increasingly downsizing" to apartments, generally beginning around age 70 and doing so more often by age 75, Rappaport wrote.
The oldest baby boomers will turn 70 next year, and the number of Americans aged 70 and older will increase by more than 20 million in the next 15 years, the Census Bureau projects.
"In consequence, multifamily home construction is likely to continue to grow at a healthy rate through the end of the decade and thereafter remain well above its level prior to the housing crisis," the report said.
Building permits for the multifamily segment soared 24.9% in May, and permits for buildings with five or more units reached their highest level since January 1990.
The report said that builders would need to adapt to the changing trends because while millenials lived in compact city spaces, older buyers tended to want more space and amenities.
(Reporting by Megan Cassella; Editing by Andrea Ricci © Copyright Thomson Reuters 2015)
Related Stories
| Jan 21, 2011
Harlem facility combines social services with retail, office space
Harlem is one of the first neighborhoods in New York City to combine retail with assisted living. The six-story, 50,000-sf building provides assisted living for residents with disabilities and a nonprofit group offering services to minority groups, plus retail and office space.
| Jan 21, 2011
Nothing dinky about these residences for Golden Gophers
The Sydney Hall Student Apartments combines 125 student residences with 15,000 sf of retail space in the University of Minnesota’s historic Dinkytown neighborhood, in Minneapolis.
| Jan 21, 2011
Revamped hotel-turned-condominium building holds on to historic style
The historic 89,000-sf Hotel Stowell in Los Angeles was reincarnated as the El Dorado, a 65-unit loft condominium building with retail and restaurant space. Rockefeller Partners Architects, El Segundo, Calif., aimed to preserve the building’s Gothic-Art Nouveau combination style while updating it for modern living.
| Jan 21, 2011
Upscale apartments offer residents a twist on modern history
The Goodwynn at Town: Brookhaven, a 433,300-sf residential and retail building in DeKalb County, Ga., combines a historic look with modern amenities. Atlanta-based project architect Niles Bolton Associates used contemporary materials in historic patterns and colors on the exterior, while concealing a six-level parking structure on the interior.
| Jan 20, 2011
Worship center design offers warm and welcoming atmosphere
The Worship Place Studio of local firm Ziegler Cooper Architects designed a new 46,000-sf church complex for the Pare de Sufrir parish in Houston.
| Jan 19, 2011
Baltimore mixed-use development combines working, living, and shopping
The Shoppes at McHenry Row, a $117 million mixed-use complex developed by 28 Walker Associates for downtown Baltimore, will include 65,000 sf of office space, 250 apartments, and two parking garages. The 48,000 sf of main street retail space currently is 65% occupied, with space for small shops and a restaurant remaining.
| Jan 7, 2011
Mixed-Use on Steroids
Mixed-use development has been one of the few bright spots in real estate in the last few years. Successful mixed-use projects are almost always located in dense urban or suburban areas, usually close to public transportation. It’s a sign of the times that the residential component tends to be rental rather than for-sale.
| Jan 4, 2011
An official bargain, White House loses $79 million in property value
One of the most famous office buildings in the world—and the official the residence of the President of the United States—is now worth only $251.6 million. At the top of the housing boom, the 132-room complex was valued at $331.5 million (still sounds like a bargain), according to Zillow, the online real estate marketplace. That reflects a decline in property value of about 24%.
| Jan 4, 2011
Grubb & Ellis predicts commercial real estate recovery
Grubb & Ellis Company, a leading real estate services and investment firm, released its 2011 Real Estate Forecast, which foresees the start of a slow recovery in the leasing market for all property types in the coming year.