For at least a decade leading up to the Great Recession multi-family housing starts were trending with single-family housing starts (in rate-of-change not magnitude). The 2009-2010 recession and the protracted recovery coincided with a compositional shift in the US population by age. The baby boomers are transitioning out of the labor force and their demand for housing is reshaping the residential real estate market. By the end of 2014, multi-family housing starts had matched or by some measures surpassed its pre-crisis levels. The recovery in single-family housing starts on the other hand has been tepid.
In the years leading up to, and proceeding the Great Recession, baby boomer demand for multi-family housing remained fairly consistent. With this as a base to support the market, the post-recession increases in demand from millennials and the elderly was enough to spur the recovery in multi-family housing units. The shift in preferences away from single-family housing units towards multi-family units, which is being influenced by many factors, is incentivizing home builders to construct more units. At the core of the shift is housing preferences is the baby boomer generation transitioning from the workforce, and wanting less living space.
The home builders with the projects in the regions where baby boomers are migrating for the climate are positioned to immediately take advantage of the new trend. Next up are the builders who are securing land for new construction in those same regions. The good news is that the upward trend in multi-family housing starts, which is being supported predominantly by the demands of the baby boomer generation is in its nascent stage. This potential tailwind can support a selective real estate portfolio over the next decade.
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