For example, in Kansas City, there were about 2,800 new apartment units built in 2015. Today there are 6,341 under construction and 12,592 planned to open by the summer of 2017. Source: Yardi Matrix
If you are wondering why so many apartment buildings are springing up around town- think Millennials. They now are 13 to 31 years old. The first half of them are out of college and they are living in apartments and condos. They are energizing our downtown's with youthful life- and they have money to spend!
The Millennials are primarily driving this demand as they graduate college, move to the city and look for full-time employment. Occupancy is near 95%, so the demand isn't dropping any time soon. (This summer, we took our family college shopping for our oldest daughter, Jessica. We visited 10 college campuses and drove about 3,700 miles. These campuses were all packed- even in the summer- with students and activity.)
Now, let's turn our attention to housing. (See the graph below. Courtesy of our friends at First Trust)
As you can see, housing starts reached a fever pitch 2004 to 2006. (Back when everyone was flipping homes.) When things got ugly, new home starts really fell off a cliff. Today, we have recovered nicely, since the bottom of the market in 2008/9, but we are well below the "normal number" of 1.5 million new home starts being built each year.
My opinion is we are just beginning to see this housing boom really take off. My expectation is for the graph above to show new homes being built above the 1.5 million mark for many years to come. It's estimated that we will need about 25 million new homes to house all of the Millennials. We still have a few years until this boom really begins, but it's coming.
Today the average Millennial is 24 years of age. From age 22 to 27 we see a big uptick in apartment demand. (which we are seeing now.) As these Millennials get better jobs, get married, and just get tired of apartment life, they will begin buying their first homes from age 28 - 33. And just like the apartment boom we are witnessing now, the housing boom is coming next. (Especially with low, low mortgage rates this time couldn't be better for Millennials looking for their first home.)
True Private Wealth Financial Management True Events!
Join Us For Election Season Investing Tips
Don't forget to join us for Election Season Investing Tips. We hope to see you October 18th, 2016 @ 6:30 pm - 8:30 pm at Election Season Investing. Bring your questions and your appetite!