Recent economic data is showing positive trends for apartment investors.
Home Prices and More Jobs Improve Multifamily Outlook
Rising home prices are good news for homeowners looking to sell, but for those looking to purchase, this trend will force higher down payments and bigger mortgages. Echo Boomers still digging out of student debt and retiring Baby Boomers on fixed incomes will be forced out of buying homes and into renting apartments as a result. This increased demand will keep multifamily vacancies down and will allow rents to gradually rise, providing steady returns for apartment investors.
A brightening employment picture also spells good news for multifamily investors as more jobs translates to more renters. Job growth is frequently market specific and we have seen many of our favorite markets – Houston and Austin in particular, experience better than average job growth in the past year. This positive employment trend is increasing demand in these markets and we are seeing lower vacancy and higher rents in response.
Boomerang Kids will rent…but when?
We pay particular attention to the economic and social trends that affect the Baby Boom and Echo Boom generations. These generations are the two largest in US History and are in the time of their life when they are most likely to rent.
Yet many Echo Boomers have turned into Boomerang Kids, young adults who are still living at home, even after graduation. I found this article on the effect of student debt on Echo Boomers to be especially enlightening. More than 1 in 3 of all US 25-29 year olds are still living at home. This number is staggering and is proof that the Echos are not impacting the multifamily market as much as we have expected.
But as we have noted before, we know the Echo Boomers will get back on their feet and eventually move out of their homes, and they will likely choose an apartment for their living arrangements. This steady, undeniable influx of new renters will last for the next decade, keeping demand up and returns stable for apartment investors in the right markets.