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Housing and Demographics: The Next Big Shift
Demographics are very useful in predicting housing trends.
It was 11 years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive.
On demographics, in 2010, a large cohort had been moving into the 20 to 29 year old age group (a key age group for renters).
As I noted in 2015, in the 2020s, a large cohort would be moving into the 30 to 39 age group (a key for ownership). That is happening now.
NOTE: This graph uses the Vintage 2019 estimates. There are questions about these estimates, and we will have much better data when the 2020 Decennial Census data is released.
This graph shows the longer term trend for three key age groups: 20 to 29, 25 to 34, and 30 to 39 (the groups overlap).
This graph is from 1990 to 2060 (all data from Census: current to 2060 is projected).
We can see the surge in the 20 to 29 age group last decade (red). Once this group exceeded the peak in earlier periods, there was an increase in apartment construction. This age group peaked in 2018 / 2019 (until the 2030s), and the 25 to 34 age group (orange, dashed) will peak around 2023.
For buying, the 30 to 39 age group (blue) is important (note: see Demographics and Behavior for some reasons for changing behavior). The population in this age group is increasing, and will increase further over this decade.
The current demographics are now very favorable for home buying - and will remain positive for most of the decade.
The Next Big Shift
The next big housing shift will be when the Baby Boom generation starts to downsize and move to retirement communities. No cohort is monolithic - some people will age-in-place until they pass away, others will move in with family (or family will move in with their parents), and some will move to retirement communities.
There is no magic age that people reach and start to transition, but looking at prior generations, it seems to start when people are around 80 years old.
This graph shows the longer term trend for two key age groups: 60 to 79, and 80+.
This graph is from 2010 to 2060 (all data from Census: current to 2060 is projected).
The leading edge of the Baby Boom generation is currently 75 (born in 1946), and these people will be turning 80 in 2026.
The peak of the boomers will be turning 80 in 2035 or so, and the tail end turning 80 in 2044 (born in 1964).
My sense is there will be a pickup in Boomers selling their homes in the 2nd half of the 2020s and lasting until 2040 or so. These homes will be older - and most will need updating - but many of these homes will be in prime locations. We should also see a pickup in retirement community construction during that time period.