Monday, October 12, 2015

Lehner: "Is 2015 Peak Renter?"

by Bill McBride on 10/12/2015 01:38:00 PM

Here is an article today from economist Josh Lehner: Is 2015 Peak Renter?

There have been at least three primary drivers of the massive shift toward renting in the past decade: finances, demographics, and taste and preferences. Much of the discussion surrounding this overall shift has focuses on the finance issues — foreclosures, credit availability, ability to afford, lack of down payment, etc — and with good reason as this is the most visible aspect of the housing bust and impact of the Great Recession. However given the ongoing strength in multifamily housing today, key questions are being asked. Among them: how long can it last and how much, if at all, will ownership rebound in the future? In other words, when will the housing market hit peak renter? To answer, let’s examine those three underlying drivers.
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All that said, our office remains skeptical that all of the shift into rental is permanent, even from a taste or preference stand point. When the Millennials do settle down, get married, have a couple of kids — at a later age than previous generations — we know single family with good schools looks a lot more attractive. Even so, it does look like most of the increase in rentals is likely to be permanent, particularly in light of the fact that no economist or housing expect I know is predicting a return to the pattern of development and growth seen during much of the past few decades. Even within the renter/owner calculus, as Bill talked about on TV, condos are likely to grow, which are, obviously, both owner and multifamily. Combine this with the possibility that retiring Boomers will actually want to downsize and live in the urban core (I think this is still an open question, not a done deal) and the outlook for multifamily remains strong.

Overall, the biggest takeaway I have from this work, is that in growing, popular areas like Portland, even if the market shifts back toward ownership somewhat, overall demand will increase for both. This is simply due to overall population growth. There will be more of all ages, and preferences a decade from now, look back at those first two graphs.
Thanks for the nice mention! There is much much more in the article.