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Is it true that large numbers of Baby Boomers are downsizing and leaving their single-family homes for apartment-living, driving the surge in multifamily rental demand? And what about Millennials -- are they less interested in homeownership than previous generations, instead preferring the flexibility of renting?
Fannie Mae's Economic & Strategic Research (ESR) Group has released two new studies that explore these supposed housing "trends." As it turns out, they might not be trends after all, revealing potentially important implications for the housing market given the large residential footprint of these two generations.
In his new FM Commentary and latest edition of Housing Insights, Patrick Simmons challenges the Boomer-downsizing narrative. He notes that data available through 2013 reveal no significant reduction in the rate at which Baby Boomers occupy single-family detached homes, even among the oldest Boomers who are overwhelmingly empty-nesters and have begun to retire in large numbers. In fact, the number of Boomer apartment dwellers hasn't budged in recent years, whereas the number of Millennials in multifamily rentals has grown by nearly half a million annually.
Simmons suggests that, as Boomers occupy some 32 million single-family detached homes, any eventual moves by large numbers out of this vast inventory and into apartments could put downward pressure on single-family home prices, shift the composition of new housing construction further toward multifamily structures, and change the types of apartments being built.
In her latest FM Commentary and Topic Analysis, Sarah Shahdad analyzes data from Fannie Mae's National Housing Survey (NHS) to examine own vs. rent preferences among Millennials -- the largest generation in U.S. history, according to some estimates.
Shahdad's analysis reveals that Millennial renters today have as much desire to own a home as the general population of renters. According to NHS data, the substantial majority of renters age 25-34 say that owning makes more sense than renting from a financial perspective, and a majority also agree that owning makes more sense from a lifestyle perspective. Additionally, the vast majority of Millennial renters say they plan to own a home at some point in the future, and Shahdad examines the reasons they cited for not yet pursuing those aspirations. She also notes that the implications are worth considering given Millennials' potential to generate significant homeownership demand.
To learn more about the authors' findings, read their FM Commentary articles.