Once described as a generation destined to be renters due to massive student loan debt and the remnants of the Great Recession, Millennials have caught up to prior generations in terms of homeownership. Recent data featured in an article by First American shows they are investing heavily in education, landing higher paying jobs and waiting to get married later. Yet, this means that when they are ready to settle down they have strong dual incomes that are helpful in landing mortgages, even in the face of increasing interest rates.
Westland’s Take: The American dream of homeownership is still very much alive and well…it may just be taking a little longer to achieve. This means that multifamily rental inventory is still extremely valuable and positioned to be a strong long term investment.
>> For more on this topic, see the First American blog here.
The demographic changes wrought by the pandemic are no secret, and one major change is that college-educated, well-paid Americans are moving away from expensive big cities like New York and San Francisco. While lower wageworkers have been moving away from these markets for many years due to the cost of living, they are now being followed by higher wageworkers who are critical for the economy of these big coastal metropolitan areas. This podcast episode suggests that these big expensive metro areas have “reached a tipping point where even people with good jobs, earning six figures are starting to feel like they can’t live there comfortably any more.”
Westland’s Take: Second tier markets, including many in the West, stand to take advantage of this new influx of educated workers, but only IF they can create enough housing to meet demand. The relative affordability of these smaller cities makes them appealing places to move, and they are poised for steady growth in the years to come. Continued investment in housing to meet the demand of these new imports should be a high priority.
>>Listen to the complete podcast on The Daily here.
Data around new housing starts shows a growing market segment of “Built-for-Rent” (BFR) homes – as the name suggests, these are homes built for the purpose of generating rental income for the owner. For people who want perks like privacy and a yard, but aren’t yet ready to buy, BFR homes offer an appealing alternative.
According to the National Association of Realtors (NAR), “The share of BFR single-family homes grew from 5% in 2021 to 8% in 2022. Both the share of homes and the number of units are the largest collected since 1974 for this market segment.”
Westland’s Take: More rental inventory – in whatever form it takes – is a good thing, given the dearth of housing. But multifamily housing can accommodate far more residents and offers more affordable options for the large segment of the population that cannot afford to rent a standalone, new construction home.
>> For more information, see the NAR Economists Outlook blog here
The indirect link between supply chains and housing values has had high stakes ramifications on the housing market. In the case of the past few years, the impact of the supply chain shortage has meant that housing prices have skyrocketed, forcing cascading impacts. According to Morgan Housel, a partner at the Collaborative Fund:
“Today, you have tech workers who make a million dollars a year, and they live in a two bedroom rambler with peeling paint…the middle class person who used to live in that house is now in low-income housing. And the person who used to live in low-income housing is now homeless.”
Westland’s Take: We will be recovering from the COVID supply chain disruption for years to come, and all this downward pressure means that affordable, comfortable multifamily housing is paramount to house our population and serve our communities.
>> For more, watch the complete conversation on YouTube here
Global architecture and planning firm, Gensler, is leading the conversation on office-to-residential conversions and recently conducted a study in beleaguered San Francisco on the topic. Through a proprietary building and ratings model, they identified what characteristics make an office building a feasible option for conversion. Last summer, the firm evaluated and ranked 36 buildings in downtown San Francisco, selecting 12 that ranked well for conversion. Their analysis of the opportunities offers much food for thought about how downtown areas might be reshaped in the years to come – to offer more housing and create more vibrant urban communities. (Image credit: Gensler)
Westland’s Take: Creative approaches like what’s described here are going to be an important part of solving America’s housing crisis and the other pressing societal challenges that come with it. That said, conversion from office to residential is FAR more expensive than upgrades to existing multifamily housing.
>> Read more about this effort on Gensler’s website here.
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