As real estate investors, tenants are our business. Demographic trends matter because they mean changing customer expectations that can directly impact our investment properties. With this in mind, Florentina Sarac from RentCafe’s commentary on their recent report showing an aging renter pool throughout the U.S has interesting implications.
Specifically, renter households aged 60+ grew faster than any other age group jumping 43 percent over the last decade and increasing from 6.5 to 9.4 million in 2017, outpacing younger age groups. “While those aged 35 to 59 grew by 17 percent, renters aged under 35 witnessed the slowest increase rate of 7 percent,” growing from 14 to 14.8 million in a decade.”
According to this RENTCafe data, out of the 30 biggest cities in the country, New York had the highest share of renters aged 60+, at 27 percent, and the city with the biggest surge in older renters is Austin, TX, jumping 113% over the past decade.
Lisa Prevost from Realtor.com picks up on the RentCafe data by explaining that the main reasons for more renters in this age group include: the overall aging of the nation’s population, low affordability, and changing attitudes about the benefits of homeownership. Prevost also notes however, citing an earlier study, that renting among older demographics is a lifestyle choice, rather than a necessity.
Finally, Jim Dalrymple from Inman reports on this data, specifically noting that the increase in older Americans renting should continue into the future. “By 2025, the number of renter households aged 60 and older is projected to grow to 13 million, and by 2035 it should it 18.6 million — or nearly double what it was in 2017.”
Single-family starts up in January, multi-family down
CNBC reported this past week that housing starts rose over 18 percent, to a seasonally adjusted annual rate of 1.230 million units in January. CNBC also noted that “U.S. homebuilding increased more than expected in January as construction of single-family housing rebounded after four straight monthly declines, but building permits for these units fell to the lowest level since mid-2017.”
Bill McBride from Calculated Risk reports on multi-family starts, noting that “Multi-family starts (red, 2+ units) decreased in January compared to December. Multi-family starts were down 32% year-over-year in January.” McBride furthers that multi-family has been volatile month-to-month, and moving sideways over the last few years.
Source: Calculated Risk
Another positive report came from Tortoise Advisors reporting through Seeking Alpha, noting this week that “Tailwinds for the housing market include strong labor markets, wage gains and improving demographics in homeownership rate and household formation.” They also state that homebuilders are expecting an improved 2019, amidst lower interest rates and a stock market rebound.
It was a busy week for real estate news in California, starting with Shawn Carter of CNBC reporting on a recent Quinnipiac University poll that shows that “a full 43 percent of Californian voters, and an astounding 61 percent of those aged 18 to 34, feel they can’t afford to live in the state.” It is worth noting that the median value for a California house is $550,000, double the national median. And, the median monthly rent in California is $2,750, 1.75x the national average.
Further to this, Joseph Pimentel from Bisnow reports on a report from Next 10 and Beacon Economics that shows that “it would take some California jurisdictions more than 1,000 years before they meet their state-mandated housing goals.” This report found that municipalities are “chronically behind on permitting new housing units, and 100 of the 539 jurisdictions have not been participating in the reporting process at all.”
Some positive news however from Michael Gerrity at the World Property Journal, who reported this week that according to Zillow data, “California markets have seen the biggest shift toward buyers since last January, led by San Jose, which has seen the most significant swing. San Francisco, San Diego, Los Angeles and Denver round out the top five markets where buyers will have an easier time navigating the market than they would have in recent years.”
Finally, Mary Ann Azevedo from Forbes provides some foreshadowing on the California real estate market, which doesn’t bode well for affordability. Citing upcoming IPOs from the likes of Uber, Slack, Lyft, and Pinterest, to name a few. Many equity-holding employees of these unicorn startups who live in California will become multi-millionaires overnight, driving up housing and living costs more generally. “Six to nine months after a company IPOs, the Bay Area will see a lot more buyers in the market, potentially numbering in the thousands.”
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