Demographic Trends

Demographic Trends are one of the driving factors when structuring a successful real estate investment strategy.

New demographic trends and changing values are going to increase the demand for pedestrian-friendly, mixed-use communities in both urban and suburban settings. The age of suburbia as we know it, is over. The increase in gas prices, growth of two-person households and the end of baby boomers’ suburban infatuation will change in coming decades. In the years to come, we will see a great re-urbanization. The growth of central cities and the suburbs around the country are redeveloping with new and revived walkable suburban town centers.

Below are the four demographic trends needed to be kept in mind when designing a successful real estate investment strategy.

1. The older baby boomers between the ages of 55 to 64 comprise roughly 26 million Americans. They may be stuck in suburban properties which are underwater because of the declining real estate prices. Their children have moved out and they would like to downsize and move to a smaller property. A property which already accommodates some future anticipated handicaps. They may consider buying or renting a condo to eliminate the physical demands of upkeeping a large home and yard. Some may simply want to eliminate staircases due to some minor health problems.

2. The younger baby boomers between the ages of 46 to 54 are roughly 52 million Americans. In an economy with roughly 10% unemployment, they are entering their peak earning years with a significant housing-market headache in front of them. The older baby boomers sold their suburban homes to the larger population of younger boomers looking to move up, however, the younger boomers now have a much smaller Generation X, now in their late 30s to mid-40s, to sell to. This development will work to restrict demand for many suburban homes.

3. Generation Y, the late teens and early 30s make up 83 million Americans. Their view on homeownership is significantly impacted by the real-estate bust. They watched millions of Americans lose their homes and hence are going to be renters by necessity and by choice. Many of them lost the confidence of prior generations that homeownership is a way to develop wealth. They hold a different set of values, they prefer the urban setting over the suburbs they were raised in. They would rather live in a smaller space in order to afford the lifestyle of the urban setting. They want to be close to their friends and workplace and they would rather walk than drive.

4. Immigrants are roughly 40 million foreign-born people living legally or illegally in the United States today. Over the coming years this number is expected to grow rapidly. Immigrants tend to cluster together and these clusters have moved from the central cities to the inner suburbs over the last two decades. The housing demand from immigrants may one day flow to the larger suburban homes. The reduced prices of these homes and their larger size make them an attractive option for the larger immigrant families.

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