Aging boomers could lead to a shift in housing demand over the next few years, reshaping the housing market in the US and affecting the economy. A lot of baby boomers will choose to move out of family homes and to downsize into multifamily units consisting of smaller town homes, condominiums and apartments.
It’s a perfectly normal choice to choose to downsize, but it could lead to a stronger rebound in the construction of multifamily units as opposed to single-family homes. According to the article in the Wall Street Journal, the construction of multifamily units is expected to increase strongly early this year, while construction of single-family homes is not expected to pick up until early next year.
In the longer term it is expected that aging baby boomers and a shift in demand from single-family homes to multifamily units will lead to multifamily construction peaking by the end of the decade. By this stage it is expected construction levels will be two thirds higher than annual levels seen during the 1990s and 2000s. In contrast construction of single-family homes at the end of the decade is expected to have reached a level comparable to just before the housing boom began.
These factors are likely to have an effect on fiscal policy, and could even affect local zoning codes. This is because suburbs hoping to retain the population of aging households may need to look at creating urban communities, and might need to carry out some rezoning to allow multifamily construction to take place. Overall it’s anticipated this predicted shift from single-family homes to multifamily construction will have a long-lasting impact on the economy in the United States. It could well put downward pressure on the prices of single-family homes compared to the prices of multifamily housing units.
It will also affect other sectors as consumers will be looking for goods and services more oriented towards the spaces offered by apartments and town homes rather than those oriented towards large backyards and larger living spaces. It’s also possible that this shift towards apartment living could lead to more people choosing to live in cities and urban areas, and if this happens there could be less demand for cars and gasoline and less demand for upgraded highways, but a greater demand for high quality public transport and amenities associated with urban living such as quality restaurants and city parks.
It is anticipated that governments and firms that are able to correctly identify these changes will be able to benefit the most.