Millennials flow to homeownership postponed. The age 28- to 34-year-old subset is among the largest population groups by size, and will play an important role for the multifamily sector going forward. This bulky cohort was responsible for strong apartment demand over the past decade, as they started their careers and formed households. Now, many are reaching a life period that historically correlates with growing their households and transitioning to homeownership; however, the conditions in the single-family market will encourage many to remain renters for a longer duration. The U.S. had been facing an acute housing shortage prior to the pandemic, since exacerbated by a surge in homebuying that drove up prices, followed by a rapid mortgage rate escalation. These dynamics led to a drastic cooldown in home purchases, with the pace of buying in early 2023 being the slowest since the global financial crisis. Meaningful price relief for prospective homebuyers has not materialized amid this demand ease, as listings remain very low and could stay that way for some time. Owners locked into lower-rate mortgages have limited incentive to move up the quality stack, keeping many entry-level homes off the market.

Spacious suburban and luxury lifestyle units could be favorites. Residents in their late-20s to early-30s that are unable to become homeowners, or are opting for the cost-saving benefi ts of renting, may have particular priorities. Those with growing families could favor roomy suburban options in locales with preferred school districts, helping backfi ll units potentially vacated by re-mote workers returning to in-person jobs. At the same time, many are waiting longer to enter marriage or start families than in the past. The lifestyle advantages of a well-located luxury apartment could appeal to this renter group.

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Sources: Marcus & Millichap Research Services; Capital Economics; Freddie Mac, John Burns Real Estate Consulting; Moody’s Analytics; Mortgage Banker’s Association; National Association of Home Builders; National Association of Realtors; RealPage, Inc.; U.S. Census Bureau; U.S. Bureau of Labor Statistics; Wells Fargo