The latest housing market numbers reflect a shift from single family home ownership – white picket fences and two car garages – to condominiums – sky-high towers and city views. The question that comes up is exactly how long will this trend last?
Current housing data shows that traditional, single-family suburban home construction is way down. Fewer people are buying single-family homes, too.
Meanwhile, construction of residences with five or more apartment units – which includes multiplexes, condominiums, and high rises – have reached their highest share of overall construction since the 1970’s. Today’s market is driven by buyers who are choosing to live in the city or the close-in suburbs, particularly people who are now getting their first jobs or don’t have confidence that the job market is secure enough for them to consider investing in a home. According to Ken Simonson, Chief Economist for the Associated General Contractors of America, “the multi-family building trend is happening everywhere.”
Americans are experiencing an urban renaissance of unexpected proportion as recent college graduates and millennials gravitate toward the cities, seemingly no longer in search of the typical suburban home. Ten years ago, multi-family housing accounted for just 17% of all housing starts. A decade later, 33% of housing starts are multi-family developments. The most recent data for this year suggests high rise construction now accounts for 40% of all new construction.
Recent census data shows that metropolitan areas across the country are growing faster than the rest of the country with cities such as Austin, TX and Seattle, WA among the swiftest. Millennials are leaving the suburbs for bright lights and big cities.
There has been a surge in urban condo and apartment building, according to a spokesperson for the National Association of Homebuilders. “The 25-34 year-old age group wish to live near their work, reduce car use, and have more opportunities for socializing.”
Young people today are interested in a different kind of lifestyle than their parents. This generation is more focused on public spaces, walkability, diverse people and activities. In addition, many people have delayed purchasing a home out of sheer necessity. Following the subprime crisis, banks have tightened their lending standards making it more difficult to buy a property. Coupled with student loan debt and the uncertainty of the job market, more millennials are choosing to rent for a longer period of time and postpone the “American Dream” of owning a home.
For the time being, it seems young people prefer the cities. According to Neilsen Company, 62% of millennials prefer to live in mixed-use communities, closer to shops, restaurants, and their place of work. As the number of high rises continues to grow, it appears the exodus to cities may not slow any time soon.
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