The Commercial Real Estate Alpha Site

Another banger, chocked full of great research and interesting analysis from Jay Parsons and John Burns.

Today’s high cost of homeownership contributes to Americans renting longer, but don’t make the mistake of thinking this is a new phenomenon of the higher-rate era. It’s not. This is a trend decades-in-the-making, and it’s had (and will continue to have) major implications on the rental housing market.

Check out this great chart from John Burns Research and Consulting. If you were under the impression that the majority of 30-somethings were homebuyers prior to the rate spike, you’d be mistaken.

Homeownership among 30-somethings has been steadily declining since the 1970s. It dropped hard in the 1980s, and again following the Great Financial Crisis.

Even in periods where it was cheaper to buy than rent (in terms of all-in monthly costs) that trend did not reverse.

So this tells us it’s about more than finances. Yes, costs do matter. But lifestyle / lifestage factors arguably matter just as much. Americans have been waiting longer to get married and have kids — trends that persist across economic cycles good or bad.

Additionally, surveys shows us younger Americans are more likely to value “flexibility” over older generations. Those of us 40+ may find this stupefying, but remember: We aren’t them, so it’s silly to wag our fingers at them and tell them how to think about renting.

…

If you’re one of those types, go tour a modern apartment building or build-to-rent home built in the last 10 years. You’ll be amazed.

To be clear: I’m a pro-homeownership guy. And I’ve made the case many times here on this app that apartments and SFR actually perform BETTER when more renters leave to buy homes (check the tape!) because of the downstream impacts on economic expansion and household formation.

But here’s the reality: The trend of 30-somethings renting longer is not a new phenomenon. Even if we make homeownership more affordable and accessible (and I think we should!), we’re unlikely to see 30-something homeownership rates revert back to 1970s levels simply because today’s 30-somethings don’t have the same priorities as their grandparents did at the same age.

Implication: Even as Americans age and population slows, there’s a built-in demand driver — the elongated renter stage of life.

#renting #housing #sfr #apartments #DPCRE #CRE #Dreznin