My consumer life cycle for real estate starts with apartments and multi-family homes for renters; that typically peaks around the age of marriage, which used to be age 26 for the boomers and now is age 28 (and rising) for millennials.
That has been one of the best segments in a roller-coaster bubble housing market that has made owning a home look much riskier, largely due to the rise of the millennials born by my rising wave of births definition, from 1976 into 1990.
That would create a rising wave of new households and renters from 2003 into 2018. But they aren’t peaking yet — and maybe won’t for quite a while.
First thing to note is that this younger group will extend the rental cycle in the downturn I’m anticipating from around 2020–2023/24 as they get even more scared to buy than young folks were during the Great Recession.
Under 35 buyers have to date bought at substantially lower rates than boomers and gen x did during the same ages. And millennials will only find themselves trailing the older generations even more as loans get harder to get and the markets swing downside again for a few years.
It’s the boomers
But more important, there is currently a new gang of renters riding into town: aging boomers. They have not saved enough for retirement, are increasingly down-sizing from larger homes now that they are empty nesters, and have seen scary volatility in housing markets for the first time in their life.
Look at this chart of growth in renters by age groups.
Damn…who would have thought. Renters 60 and older have grown the fastest, at 43% over the last decade.
From 2017 to 2035 they will double from 9.4 to 18.6 million, growing faster than the 35–59 age group, and even more so than the slowing rate of those younger than 35.
By 2035 seniors will grow to 33% of the rental market and under 35 will fall from 34% to 27%. Older people have different needs, like no stairs! Don’t make them get one of those tacky stair sliding seat units…please!
And where would you find the highest growth in such old fart retirees? In Arizona, Nevada, Florida and Texas — affordable and warmer retirement areas. But they are everywhere, as they have always been the biggest force at any age that their massive wave has moved into.
There are similar things going on in Australia, with the ABS noting that the percentage of older households still paying off a mortgage has tripled between 1995–96 and 2015–2016.
I suspect these numbers are now much higher after the housing market peaked in 2017–2018.
And what’s more, with a looming credit crunch in Australia, there could be a flood of older households that just throw in the towel, sell the home and rent for their remaining years.
Don’t get me wrong, the situation is far worse in the US when it comes to grandparents being forced into renting.
But as central bankers pour petrol on markets with low or negative interest rates, one begins to wonder whether there will be anything left for the next generation in terms of home ownership?
It’s not a pretty picture, that’s for sure.
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