While millennials will continue to be the main driver for apartment occupancy and new construction for the next few years, downsizing baby boomers will represent an ever-larger share of activity over the long term, according to a report.
The report -- by Jordan Rappaport, a Federal Reserve Bank of Kansas City senior economist -- said while millennials shifted back to apartments following the housing crisis, adults in their 50s and 60s, the current age range of baby boomers, accounted for more than half of the increase in the number of occupied multifamily units both before and after the housing crisis.
“Older adults (ages 50-69) accounted for most of the increase in multifamily occupancy (nationwide) from 2000 to 2007 and from 2007 to 2013, and nearly all of the net increase over the two periods combined,” Rappaport wrote.
“Looking forward, millennials will continue to help drive multifamily construction over the next few years. Over the longer term, however, baby boomers will be the main driver of multifamily construction as they age through their senior years,” he added.
Russell Valone, MarketPointe Realty Advisors president said while millennials are accounting for most of the leasing now, it’s not far-fetched to believe that boomers could outpace millennial apartment demand in a few years under the right conditions.
“The one way I could see this happening is when boomers cash out of their homes and take the equity and move back into apartments. We’ve seen that happen before,” Valone said.
Valone added that while many millennials have been scared off by the recession, when they come into prime child-bearing years, they will want and need single-family homes.
Looking at U.S. Census data for San Diego County, Valone said in 2013, 81 percent of people under 35 were renters.
About 75 percent of residents over 55 were owners, but emphasized that this figure is bound to decline as the boomers see the advantages of multifamily housing.
Alan Pentico, San Diego County Apartment Association executive director, said during a recent national conference in Las Vegas, he ran into other conventioneers who also noted the changing demographics in terms of boomers.
“This is happening; I’ve heard it in other parts of the country," said Pentico, adding that many of these boomers may not like what they see if they continue to own. "People [who own homes] are looking at their retirement accounts and deciding their next move.”
According to the report, “Many analysts have speculated about the demographic composition driving the multifamily rebound. A number of anecdotes suggest millennials may be the main driver, due in part to a strong preference for living in urban cores where multifamily housing dominates. Other anecdotes suggest baby boomers downsizing from single-family homes may be the main driver.”
Pentico said, “There are any number of reasons for moving back to apartments. [Boomers] may have fewer dollars to spend, they may not have kids, or they can just do without the large house.”
Pentico added that many baby boomers are also moving down because they like the amenities of senior apartment complexes.
Pentico cited one that is mostly leased is Strategic Realty Capital’s 111-unit Pacific Pointe at 171 Fourth Ave. in Chula Vista.
Amenities include a large multi-purpose clubhouse, on-site beauty salon, theater, chapel, resident lounge areas with WiFi and chef-prepared meals for apartments that start at around $1,600 per month.
Not everyone agrees with the premise that boomers will at some point outpace millennials in terms of apartment demand. Alan Nevin, Xpera Group director of economic and market research, said this ignores the attachment people have to their homes.
“That’s completely wrong," he said. "Eighty percent of baby boomers live in their own homes here and intend to die in them.”
Nevin said he needed to look no further than his own family: While he and his wife recently moved from a larger home in La Jolla to a smaller one in Carmel Valley, both are single-family homes.
“We see no indication that large numbers of people are selling their homes and moving into apartments,” Nevin added. “The problem is we have almost a complete absence of senior housing that is appealing.”