The topic of young adults living at home is critical to the housing market since it will impact future home building, renting, buying, and purchasing behavior for the foreseeable future. It is interesting that Trump being the de facto candidate for one of our major parties is basically a real estate marketer/developer that pitches real estate that is “too great†for most Americans. On the other end, we have Sanders who is essentially the direct opposite of Trump (i.e., free college tuition, break up the banks, etc). The billionaire and the non-billionaire – interesting. At this point, you have 3 candidates left standing and in many households, this divide is playing out. You have Taco Tuesday baby boomers that essentially were fortunate to buy at a time when the housing playing field was easy. I even see this in neighborhoods I’m familiar with. These are people that bought and many don’t even have college degrees. In virtually every case, many would not be able to buy in their own hood today even if they took a time machine and came back with their similar educational training and inflation adjusted income to today’s hyper competitive arena. When a home goes for sale, it is bought by investors or by two working professionals (most common I have seen are tech couples made up of engineers and programmers). Parents may gripe but now many have their Millennial kids living at home. If it feels like a common trend it should be because this is now the most common living arraignment for young Americans.
The kids are not moving out. The high cost of housing is having a big impact on the Millennial generation. In high cost areas you are seeing homes being sold to investors (including foreign buyers) and those that do buy as owner occupied tend to be a lot older than previous first time buyers. Even from family and friends it is interesting to see a few homes sold in their varied neighborhoods only to be turned into rentals immediately – these were very standard single family homes in neighborhoods where rentals were rare (not anymore). Yet another continuing trend is the number of working age Millennials living at home with mom and dad. Mom and dad are your typical Taco Tuesday baby boomers and are “shocked†that their kids can’t afford to rent let alone buy a home. Given current prices Millennials are not going to be buying in many high priced markets for years to come.
How extreme can the housing situation get? Can things get crazier? Probably. Are people in SoCal living in a warped bubble thanks to everyone thinking they are some kind of marketing guru? When you look at the rental revolution, the answer is a resounding yes. We live in a world where Black Swans are common even though by definition they should be extremely rare. Just last year, the notion of Trump being the Republican candidate would have been dismissed. Yet here we are. Bernie Sanders? It was going to be Clinton and Bush with no outside surprises. The establishment is blind and most people fall into lemming like behavior. You are either an “R†or a “D†but in the end, the establishment on both sides is virtually the same when it comes to finances. In housing the amount of sheep like behavior is amazing. This is how we get people renting out vans and RVs as if they were luxury rooms. And that brings us to a current trend in the housing market: extreme rental living in Los Angeles.
It was no surprise that for the fourth consecutive year, building of multi-family units outnumbered single family construction in California. This is part of the renting trend that has gone on for nearly a decade now and builders are merely catching up. One interesting finding in the data is that for Orange County. In Orange County one city accounted for nearly half of all new homes, condos, and apartments over the last six years. That city is Irvine. What is interesting with Irvine is that parts of the city are being built to cater to a foreign audience. Certain subsections are seeing 80 percent of properties sold to international buyers; we are talking about new homes that are selling for $1 million or more mostly in all cash offers. It is an interesting trend. But what is even more telling is that most of the construction in Irvine was for apartments and condos. Even in an affluent market the renting revolution is occurring.
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