- Millennials are projected to overtake Baby Boomers as the largest living adult generation.
- As older generations age and look to sell properties, growth in the rental market could outpace homeownership over the next decade.
- Americans have already begun to lean toward rentals, as softer construction activity and housing shortages price potential buyers out of the market.
Over the next decade there could be higher growth in the rental market as opposed to homeownership. Older generations are also likely to start looking to sell their homes.
Over the next 10 years, home supply is set to jump by more than two-thirds, stated by Morgan Stanley in a new research note. But those born between 1981 and 2012 (Gen Y & Z) seems to edge only 7% over that period.
Millennials are predicted to surpass Baby Boomers as the largest living adult generation this year, according to population projections from the US Census Bureau. With new generations it could cause an increase supply in the rental market. This is especially the case in metropolitan areas,
“Gen Z + Y are more likely to rent than own, and the bulge in supply when the Baby Boomers sell looks to dampen net single-family demand,” the analysts said. “This drives a surge in rentership while ownership is challenged.”
Some rental markets could see a bigger increase as some areas are more in demand than others. Currently, New England and Rust Belt have the largest group of baby boomers than other generations. However, the result is the exact opposite in the Pacific and the West South Central.
As the housing market has been surging and construction, along with development, has been slim, it has led Americans to lean towards rentals. The fact that mortgage rates are lower could help increase home sales. However the new recent tax laws have reduced the incentives for people to buy homes.
“Home sales are set to tread water over the next couple of years, which is good news for the rental sector,” Capital Economics economists Matthew Pointon and Andrew Burrell said in a research note. “If Americans aren’t buying homes, many will look to rent one instead.”
In the end, over the next decade that demand for homes may hold up for the younger generations. In 2018 Millennial still contributed to the most of the home buying growth
“I believe millennials will be the most important generational source of demand in the housing market, as well as the general economy, for a number of years to come,” he said.