How long can the multifamily boom last? How about five to 10 more years? That’s what the results of a recent homeownership survey by national credit bureau Experian suggests.
The Experian survey found four key reasons why consumers are turning from buying to renting.
The most important? According to Experian, homes feel less affordable to buyers today than they did 10 years ago. This is causing both those who’ve never owned a home and even some who have to opt out of buying a single-family home or condo unit.
According to Experian, during the next five to 10 years, 27 percent of survey respondents said they will opt out of buying a home in the next five to 10 years. Of those respondents, 34 percent were from the ages of 18 to 34, prime home-buying age.
That’s important for the multifamily market. As more people decide not to buy, more flock to rental living. With so many potential homebuyers moving to the multifamily market, it’s easy to see strong demand for apartment units during the next decade.
That’s why numbers such as those in the latest Minneapolis/St. Paul Compass Report from Cushman & Wakefield/NorthMarq aren’t shocking. The latest report from Cushman said that developers could bring as many as 8,000 new apartment units to the Twin Cities market this year to meet the still-rising demand for apartment living.
In its second quarter report, NAI Wisinski of West Michigan said that apartment rents in the West Michigan area have risen 3.23 percent on a year-over-year basis. And in Detroit, Marcus & Millichap predicts that developers will add 2,400 new apartment units to the market by the time 2017 ends. That will be an 11-year high, and a significant boost from the 2,000 new apartment units that developers brought to the market last year.
It’s clear, then, that developers across the Midwest believe that the apartment boom isn’t ready to slow any time soon.
The Experian survey provides data to back up that belief. The survey found, for instance, that even many consumers who can afford to buy homes say they will instead rent during the next five to 10 years. Experian’s survey found that 29 percent of consumers with incomes higher than $100,000 are choosing to opt out of buying a home.
“With the cost of homes today and low inventory in many areas, it’s no surprise that many consumers either prefer to rent a home or resign themselves to renting because it’s the only option,” said Sandra Bernardo, manager of consumer education at Experian. “This has been the trend for several years since the housing bust. We’ll see if developers and communities address this issue in the future to build more starter homes to fit buyers’ pocketbooks.”
Why are so many choosing not to buy? Experian pointed to four main reasons: The credit bureau said that 37 percent of respondents cited a desire for more flexibility to relocate, while 26 percent did not want to carry as much debt and don’t want the responsibility of maintaining a home. A total of 36 percent of respondents said there aren’t enough houses on the market from which to choose, while 54 percent said that houses today are less affordable than they were 10 years ago.