The most significant factor for apartment investors is the Baby Boomer’s move from homeownership to renting.
2011 is the 65th birthday for the Baby Boomers as they continue to impact every facet of America’s economics.
Boomers create lasting security for apartment investing
Per CNN, by 2030, when all of the Baby Boomers turn 65 or older, they will make up 19% of the population, up from 13% today.
Furthermore, the Baby Boomers are the main reason for projections that the number of Americans 65 and older will reach 88.5 million by 2050, more than double the estimated 40.2 million in that group in 2010.
This flood of Baby Boomers into retirement over the next 40 years creates a seismic shift from homeownership to renting for the Boomer generation, insuring substantial upside for apartment investing. This impact will further solidify apartment investing as a proven method for developing permanent wealth.
Recent studies verify trends of Boomer’s shift to rental households
Mark Moran, VP of marketing and business development at MyNewPlace, tracks trends that will affect the rental industry.
MyNewPlace shows an increase in the age of its visitors. In 2008, fewer than 15% of visitors were 55 years and older. This year, visitors age 55 and older made up 23% of all visitors — a 55% increase in two years.
“There is an emerging cohort which is the older renter”
– Mark Moran
Additional affirmation reflecting this trend comes from The Joint Center for Housing Studies of Harvard University.
The JCHS analyzes the dynamic relationships between housing markets and economic, demographic, and social trends, providing decision makers with the knowledge needed to develop effective policies and strategies.
It forecasts a trend of aging Baby Boomers retiring and moving from homeownership and into rental households seeking to convert their home equity into much-needed retirement income.
Boomer’s busted economy
The financial set backs of health care expenditures rising and many of the Baby Boomer’s portfolios taking massive hits due to the recession is tough enough. But when you combine that with the decreased income due to leaving the workforce, it makes sense that renting is a more cost-effective and viable option for them.
As Director of the Center on the Economics and Demography of Aging at the University of California, Berkeley, Ron Lee alludes to this economic pinch on Baby Boomers.
“Boomers are leaving the labor force at a time when health care costs are growing at a rate faster than productivity and per capita income growth, leaving a big gap.”
– Ron Lee
This financial gap due to retirement and health care costs results in increased rental occupancy among Baby Boomers and makes apartment investing an effective investment strategy for years to come.