There is some interesting information about future rental demand over at Axiometrics, but the title is only half the story. It is titled "Apartment Demographics Study Shows Possible Millennial Pent-Up Demand."
The article refers to a Pew Research Center report which found that there are fewer households headed up by 18-34 year olds than 10 years ago. This is in spite of a decrease in unemployment for this age group and an increase in the group's population. So, there's more of them, they're getting more jobs, but they're not starting households.
To expand on that, the unemployment rate among this age group over the past five years has dropped from 12.4% to less than 8% in 2015. At the same time, there are also 5.4 million more in this age group. It is clear that in spite of these two positive factors, young adults are not forming new households, and so they're not buying homes like they used to.
Two possible reasons for this are mentioned, one expected, but the other kind of new to me.
•The recovery of the economy may be creating more jobs, but they're generally not of the quality that breeds confidence in younger college graduates. Student debt is also mentioned, another logical factor.
•The one that is interesting is the mention of "helicopter parents." We all know there are a lot of them out there, generally Generation Xers who are more willing to have their children living at home in their early adult years.
While some housing market watchers are hopeful that these numbers indicate pent-up demand that will spill out into the home-buying market, it is just as likely to go the other way. When they decide to move out on their own, it may be more likely that they will rent rather than buy. So, that's the lead and the title of the article.
But, then we get to the second group discussed, Baby Boomers. Studies now are showing a definite trend for baby boomers and empty-nesters to prefer renting over buying when they move. The 55 to 74 year old age group has created an average of 355,000 renter households each year from 2006 through 2014. This number includes renting of single family, condos and town homes. Many in this group lost their homes to foreclosure during the market collapse that began in 2007.
This age group already has an established household, and if they continue to rent they will rent higher dollar properties, and often in vacation oriented or urban areas. Their bad experience with a foreclosure may keep many of them in the rental mode for years to come.
So, what do these numbers mean for rentals and investors?
In August of 2015, annual effective rent growth exceeded 5% for the seventh straight month. Nationally, occupancy exceeded 95% for the sixth consecutive month. Boomers are coming online at around 10,000 per day, so that group is going to get larger for a few years. I can only predict that the next few years will be really interesting for real estate investors. But, I do have a healthy positive attitude about buying more rental properties.