NEW YORK – Jan. 21, 2014 – The aging of the nation’s Baby Boomer population could reshape the United States’ residential real estate market – and economy – in the coming years.
As members of this demographic get older, many will move out of the houses where they raised families and downsize into smaller, cozier apartments, condominiums and townhouses.
This is a normal transition, but it represents a potentially massive shift in the nation’s housing demand. Based on demographic trends, the U.S. should see a stronger rebound in multifamily construction than in single-family construction in the years to come.
“By the end of the decade, multifamily construction is likely to peak at a level nearly two-thirds higher than its highest annual level during the 1990s and 2000s,” says Kansas City Fed senior economist Jordan Rappaport.
At the same time, the shift from single-family dwellings to multifamily housing will almost certainly have implications for fiscal policy, monetary-policy analysis and possibly even local zoning codes.
“Suburbs seeking to retain aging households may need to re-create a range of these urban amenities and enact some rezoning to encourage multifamily construction,” says Rappaport. He also says that the projected shift from single-family homes to apartment, condo, and townhome living will likely put downward pressure on single-family prices.
“It will shift consumer demand away from goods and services that complement large indoor space and a backyard, toward goods and services more oriented toward living in an apartment,” he explains. “Similarly, the possible shift toward city living may dampen demand for automobiles, highways and gasoline, but increase demand for restaurants, city parks, and high-quality public transit.”
Rappaport suggests that the companies and governments that correctly anticipate such changes stand to reap the biggest rewards.
Source: Wall Street Journal (01/07/14) Leubsdorf, Ben
