CoStar Insights

A Storm Brewing on the Apartment Horizon

by Mark Hickey | Dec 06, 2016
Downtown LA

The median age of Millennials is now 26 years old [1], and, as a group, they now have the tastes and preferences that many of us had in our 20s. But as one gets older and goes through the cycle of life one’s tastes change, willingly or unwillingly, and these Millennials may find their lifestyles starting to change, too, and soon. The current median age for marriage is 26 for women and 28 for men[2], and the median age for a first-time college-educated woman to become a mother is 28.2. Combine all that with the fact that the median age for a first-time homeowner is 32 according to the most recent profile of home buyers and sellers from the National Association of Realtors, and what do you get?

A recipe for a fall in apartment demand, as Millennials get married, start having families, and begin buying homes (not necessarily in that order). And not only will demand decline as a result of this trend, but it will get hit with the additional problem of a lot fewer people aged 20–34, those most likely to rent an apartment. Looking at Exhibit 1 below, the population of this cohort reaches a peak in 2023 and will then shrink for the next 12 years. While this may not lead to rent losses (assuming it doesn’t coincide with a recession), one would have to think that a sustained period of anemic rent growth is a strong possibility. And will that lack of rent growth lead to a correction in prices? Will the correction of prices make refinancing loans made prior to 2023 difficult? Generally, only religious institutions and colleges plan that far out, but these are things to keep in the back of your mind for the next five to 10 years.

Exhibit 1: The Number of Prime Renters Will Eventually Begin to Shrink

1. U.S. Bureau of the Census

2. Pew Research Center


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