Are the millennials ditching home ownership? In December, the home construction industry reached its post-recession peak, but this time it’s apartments, and not houses, that are driving the recovery. The WSJ reports:
The increase was led by a surge in apartment construction, with starts up 116% for buildings with five or more units. Developers of such buildings, which make up 35% of all new residential construction, anticipate that demand for rental housing will keep growing in coming years.
Single-family home construction is also on the rise, but at an 18.5 growth rate, it’s increasing at a much slower rate than the booming apartment market.
Generation Y is driving much of the boom. In the third quarter of 2012, the rate of new household creation reached a six-year high, and most of these new households have opted to rent rather than buy. The construction industry has taken note, ratcheting up investments in apartment buildings:
Lennar Corp., the third-largest U.S. builder by sales, this week said it would build $1 billion of apartments over the next three years. Toll Brothers Inc., the country’s largest luxury-home builder, said Wednesday it would expand its rental presence by building 600 apartments in Washington.
Many of these new renters are millennials, whose preferences for renting over buying have been a hot topic of conversation among the chattering classes. It’s too early to tell whether the renting preference is the last gasp of the recession or the wave of the future; we don’t know whether millennials are renting because they are too broke to buy or because they have truly fallen out of love with the idea of home ownership.
Hopefully the recovery will put enough money in their pockets so we can answer that question sooner rather than later.