Studying demographics isn’t exactly on the top of the most people’s lists of ways to spend our small amount of leisure time (I’m an outlier in this regard).
It does matter if you are making investment decisions now that won’t play out for years to come, such as purchasing your first single-family home.
Regular clients know that one of my primary discussions with them prior to a purchase is how long they intend to stay in their home. These decisions have big implications, the largest probably being interest rate risk. Also very relevant, though, is keeping an eye on who will be looking to purchase your property when you decide to sell.
One of the best resources I’ve come across for this information is blogger Bill McBride, whom I’ve been reading on a daily basis for years now. For anyone unacquainted with his work, a look at his website Calculated Risk is encouraged. For a quick synopsis of some of his thinking, please see the Business Insider article on him linked below.
While I’m heartened that Bill is very encouraged by the growth in the economy and the potential support for single-family housing given the demographic trends – I still think we should keep a close eye on the income levels Millennials will be able to maintain, and whether this will be enough to support the purchase of the assets Boomers will be selling to fund their retirements.
McBride argues that currently, with so many 20-to-24-year-olds, the demographics are very favorable to apartment renting. And so of course these days, the multi-family housing sector has been leading the way. And you hear all these stories about how people aren’t into homeownership anymore. But the demographics that are currently favorable to apartments will turn into demographics favorable to homeownership, as the cohort gets older, moves into higher paying jobs, and wants more space for those new babies.