November 18, 2015
This is the second of three stories this week by Connect Media on the current drivers of the multifamily market. Look for the third submission on Friday. Check out more coverage on this topic at Connect Westside Los Angeles.
Millennials make up the highest number of renters. However, a recent Pew Research Center Report – “More Millennials Living with Family Despite Improved Job Market” — said that, as the title suggests, fewer young adults are forming their own households.
Though there are more young adults out there today than at the start of the Great Recession, “the nation’s 18-to-34-year olds are less likely to be living independently of their families than they were in the depths of the Great Recession,” the report said. Though the Pew report focused mainly on homeownership, household creation has an impact on the rental pool as well.
The Pew Report also said that:
• The number of young adults living with their parents or roommates has increased steadily since 2007.
• Since 2005, the non-student population of 18-to-34-year olds has increased from 55.9 million to 61.3 million.
•The number of households headed by the age group has decreased from 24.4 million to 22.3 million.
What’s interesting to note is that a lack of jobs isn’t a factor. Pew said that the Millennial unemployment rate has dropped to less than 8% in 2015 from its peak of 12.4% in 2010.
Axiometrics real estate economist Chuck Ehmann noted a couple of potential reasons for household formation reluctance among multifamily Millennials:
• An economic recovery that isn’t creating the right types of jobs to support healthy household formation.
• Continued student debt that might be preventing young adults from venturing out on their own.
• Parents who are less willing to push their adult children out of the nest than previous generations were.
These Millennials will eventually want to form their own households. And given this age group is more likely to rent than own – student debt remains an obstacle when it comes to obtaining a mortgage – demand for rental properties could escalate.