Demographic shifts in the U.S. population, as well as changes in behaviors and lifestyle, will impact the demand for different housing segments in the coming years.
A recent analysis by Invesco Real Estate looked at demographic age bands – which ones are growing and which are shrinking – to understand today’s current housing demands and to predict how housing choices will evolve in the next 25 years.
First: demographers predict that the U.S. population will grow by 11% by 2050 and that there will be a 47% increase in the senior population in that time. Though this growth will be significant, not all population segments are growing. The youngest generation, including children, older students and early-career adults, is shrinking in population.
Just as age band patterns are fluctuating, so too are lifestyle trends by age group. The number of young adults between 25 and 34 years old who are living at home with their parents has increased 87% over the past two decades. Perhaps in conjunction with this, both the average age of marriage and of having children are rising. For older generations, individuals are retiring later and living more active lifestyles for longer. The average age for senior housing entry was mid- to late-70s in the not-so-distant past but is now in the early- to mid-80s.
These shifts, in combination with higher living expenses, changing lifestyle priorities and a projected continued rise in life expectancy, will have specific impacts on the real estate market and the demand for different housing segments. The likeliest outcomes are more single-person households and households without children. With home ownership more difficult to achieve than in the past due to high mortgage rates, low inventory and high home prices, these segments are more likely to stay in the rental market longer for both lifestyle and affordability reasons.
What housing segments are needed to meet the demand of these changing demographics and behaviors? While multifamily housing is typically popular with individuals ages 25 to 34, this age group is expected to shrink over the next 10 years. But single-family rentals are proving popular as they provide the living space of a traditional single-family home without the subsequent ownership costs. It’s expected that the demand for this housing segment will increase over the next decade.
Manufactured housing is also expected to make gains over the next 10 years, in large part due to affordability. These units can be of good quality yet more affordable than a traditional single-family home, making them an option for both working people and budget-conscious older adults.
The need for senior housing, including independent living and assisted living facilities, is also expected to grow.
It’s not simply age-related population trends that are impacting shifts in property sector demand. According to strategists at Invesco, immigration, economic growth and geographic location are also driving the movement. To meet changing needs, diversification across the residential spectrum and leaning into areas that are expected to generate the most growth will prove the most successful.
This post is based on information found on Bisnow.
