High School Years and Future Housing Demand – More on the Pent up Demand

High School Years and Future Housing Demand.

This is an interesting article from the National Association of Realtors showing the future demand for housing.  They looked at the 15 to 19 year olds and the demand for housing they will require as they move out of Mom and Dads house.

NAR is speculating there will be greater demand going forward for rentals (apartments, multifamily) to meet this age groups needs for housing.  I partially agree with their conclusion with a couple of exceptions:

The early 2000’s generation moved directly into homeownership bypassing the rental phase for the most part so not a lot of rental properties were constructed.  The other main reason, and more importantly why additional rental properties weren’t built is because of costs.

During the 1960’s and 1970’s apartment buildings could be constructed at relatively low costs.  If you go through some of these older apartment buildings you will notice a couple of things right away, the wood frame construction and the lack of wheelchair access.  You will also notice all the cooking smells, this gets into the HVAC system differences.  Many of these buildings were built with 2×4 construction and either “garden style” (similar to split entry in single family), and lacking elevators.

If you look around and think about any “newer” apartment buildings, what do they have in common?  1) they are in high rent areas and 2) they are very large  3) they “amenities” such as pools and fitness rooms.   These new rental units need to be in locations that can demand a lot of rent in order to make the economics work for the construction costs. There also needs to be a lot of units to make the economics work for adding elevators and other building code requirements that weren’t around 30+ years ago.   Unless the economic formula changes or building codes change,  I don’t foresee builders supplying the need for additional apartments for this demographic in the marketplace.  The days of building a 4 unit to 30 unit building are gone.   This will put additional demand on rental housing, duplexes, four-plexes and single family homes.

I could be wrong, there is a lot of apartment units going up around the Twin Cities now – in high rent areas.  The market may be overbuilding apartment units which could force rents lower to pull in this demographic.  But as they are targeted now, the rents are too high for this demographic group just starting out.



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