Commercial Real Estate Investors Follow Migration Trends
WHAT THE U.S. HOUSING SHORTAGE MEANS FOR COMMERCIAL INVESTORS
by John Chang
HOUSING SHORTFALL BACK IN THE SPOTLIGHT. Employment growth, reopen-
up with. The current landscape of historically high material costs and insufficient labor in the construction industry will institute additional hur- dles as well. DEMOGRAPHICS AND WIDENING AFFORDABILITY GAP FORETELL GREATER RENTER DEMAND. The accelerated rate of household growth over the next several years is primarily due to the aging Millen- nial cohort. The largest segment of the grouping is reaching their early 30s, an age range that has typically aligned with family formation and the transition to homeownership. The housing shortage has pushed single-family sale prices to new heights, though, raising the bar to become a first-time homebuyer.
The difference between an aver- age monthly apartment rent and a typical mortgage payment on a single-family house in the U.S. more than doubled over the past year. As a result, many households that would like to buy a home but are priced out are opting to rent, directing demand toward multifamily housing, particularly luxury units for those on the margin. At the same time, some young households prefer the flexibility of a shorter-term apart - ment lease and reduced mainte- nance costs as well as the lifestyle and amenities that higher-qual- ity apartment complexes offer. Improved demand for luxury rentals was reflected in the national Class A vacancy rate falling 100 basis points in the second quarter to 4.5 percent.
ing economies, and the revival of population mobility in the first half of 2021 led more people to search for residences after being locked in place during much of last year. This amplified the ongoing housing short - age in the U.S., a storyline that was largely camouflaged by more perti - nent narratives that emerged during the pandemic. Despite record levels of both single-family and multifam- ily development, demand is poised to outpace supply and could further aggravate the shortfall in the coming decade. More than 1 million new households are expected to form in every year through 2031, a pace that builders will struggle to keep
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