Job losses and foreclosures have forced millions of Americans to cut costs by moving in with relatives and friends. The largest segment of these so called “couch surfers” are young adults just out of college with little or no job experience.
It’s estimated that 3.4 millions housing units will be needed once the economy recovers in order to meet this pent-up housing demand, according to a research report released by John Burns Real Estate Consulting Group.
These twenty-somethings are known as “Echo-Boomers”, children of the infamous Baby Boomers. Echo Boomers are expected to outnumber their parents and will become the largest generation in American history.
Baby boomers are just now heading into retirement, and most are not prepared financially. Taking care of their adult-age children will not be tolerated for long.
Once college graduates are able to find employment, they will likely be just as happy to move into their own homes as their parents are to see them off. Where will the bulk of this young generation go?
1. Entry-level jobs. Echo-boomers are generally quite mobile because they are unmarried without children. They will be willing to migrate to areas like Texas, where job creation is higher than the rest of the country.
2. Warm-climates. According to the 2010 U.S Census Bureau, northern US states have lost 20% of their youngsters to warmer, southern climates.
3. Downtown living. Twenty-somethings prefer cities over suburbs because most haven’t started a family yet and prefer an active lifestyle similar to college life.
4. Apartments. College graduates can’t afford to buy homes or even rent them, especially in downtown areas. They will prefer affordable apartment living.
Given these facts, well-located apartments will be in high demand over the next decade. Don’t be surprised to see an increase in multi-family construction during the 2010’s.
As the economy recovers over the next ten years, the Echo Boomers will have more job experience and higher pay. They will also be ready to settle down and start a family as they enter into their 30’s. Many will be inheriting wealth from their baby-boomer parents at that time.
As rents increase and the 2007 foreclosure crisis becomes a vague memory, this giant population will be looking to move their newly-formed families back into the suburbs, just like their parents did.
Tip: Expect another housing boom in the early 2020’s.
In summary, if you are looking to invest in real estate, apartments could be a good idea over the next 10 years. As we approach 2020, consider repositioning your portfolio back into single-family starter homes. Apartment vacancies will likely increase as Echo-Boomers buy homes.
If you are buying single-family homes at bargain prices today, be prepared to hold them for at least 10 years in order to get the biggest bank for your buck. Keep in mind that high-cash flow properties are much easier to hold than negative cash-flow ones.
Just starting out? Consider buying a primary residence that is cheaper than renting. Once you move out, don’t sell. Rent your property before buying another.
If you did this once a year, you would own 10 homes by 2021. How? Save your money! But it doesn’t have to be much: You only have to put 3.5% down on a primary residence with an FHA loan.
When the housing boom is back, you could see your equity grow substantially. But even if it doesn’t, you should be enjoying a tremendous amount of monthly cash flow from rents.
Kathy Fettke is the CEO of www.RealWealthNetwork.com, the #1 resource for new and experience real estate investors.
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