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The Economy & Housing: How Does One Affect the Other. Andrew Mazak Vogt Strategic Insights May 2016. Demographic Changes Impacting Housing (Ohio, Indiana, Pennsylvania, Kentucky & West Virginia). Source: 2010 Census; ESRI; Urban Decision Group; VSI.
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The Economy & Housing:How Does One Affect the Other Andrew Mazak Vogt Strategic InsightsMay 2016
Demographic Changes Impacting Housing(Ohio, Indiana, Pennsylvania, Kentucky & West Virginia) Source: 2010 Census; ESRI; Urban Decision Group; VSI Source: 2010 Census; ESRI; Urban Decision Group; VSI
Demographic Changes Impacting Housing(Ohio, Indiana, Pennsylvania, Kentucky & West Virginia) Source: 2010 Census; ESRI; Urban Decision Group; VSI Non-rural counties renter households 25-34 years of age = +2.9% increase projected
Demographic Changes Impacting Housing Seniors: Aging In-Place Young Households: Moving to Big City
Demographic Changes Impacting Housing(Ohio, Indian, Pennsylvania, Kentucky & West Virginia) Source: 2010 Census; ESRI; Urban Decision Group; VSI
Demographic Changes Impacting Housing Rural Rental Housing Non-Rural Rental Housing
Gen Y (Millennials) Is Now The Largest Generation • Exposed to the economic reality of the recession • Declining property values, poor job prospects • Moved into basements, lived with parents and ‘hung out’ on social media
What is it about Millennials? • It’s numbers • They’re staying single longer • They’re not buying homes • They’re focused on experiences • They want to be in the middle of activity
Baby Boomers is #2 • Now the second largest generation • Rapidly becoming empty-nesters • In search of experiences (sound familiar?) • Worn out from the big house • Connected like their kids (with access to information) • Love the idea of being flexible
How Do Changing Demographic Trends Translate to Housing Demand? • Millennials and Baby Boomers are seeking similar amenities/features/characteristics • Increasing demand for 1-bedroom units • Locations close to entertainment, dining, sports and the arts. • Want walkable. Want to ditch the car. • And maybe close to where they work. • Will reignite the demand for condominiums.
Rural Area Rental Housing Conceptual Challenges: Appeal to Millennials and Baby Boomers • Accessible design (single-story or elevator-served) • Want walkable community – dog/pet friendly • Have community amenities to promote interaction with neighbors, such as: clubhouse, fitness center, business/computer center, scheduled activities/ outings, community gardens and/or rooftop patio
Demographic Changes Impacting Housing(Ohio, Indian, Pennsylvania, Kentucky & West Virginia) Source: 2010 Census; ESRI; Urban Decision Group; VSI
Ohio Overall Rental Market Conditions Rental Assistance units are nearly 100% occupied, while non-RA units in RD-515 projects in rural areas typically experience lower occupancy levels.
Affordable Housing Becomes More Critical • Economy is changing and so is the demand for housing. • Higher paying jobs are being replaced by lower paying ones. • Product built in the ’60s and ’70s to house the baby boomers is obsolete in today’s market. • Not terribly energy efficient • Poor, chopped-up design • Marginal locations
Affordable Housing Becomes More Critical • Economy is changing and so is the demand for housing. • Higher paying jobs are being replaced by lower paying ones. • Product built in the 60s and 70s to house the baby boomers is obsolete in today’s market. • Not terribly energy efficient • Poor, chopped-up design • Marginal locations
Fracking Compensation Compared to Local Pay • In 2013, fracking-related employees earned an average of nearly $75,000 per year • At the same time, local Ohio workers earned approximately $45,000 per year Sources: Ohio Department of Job and Family Services & Quarterly Economic Trends for Oil and Gas Industries
Horror Stories of Housing Costs Skyrocketing 2-Bedroom/1.0-Bath apartment 2011 asking rent = $425/month 2013 asking rent = $1,800/month (furnished)
Fracking Impact on Housing Source: 2010 Census; ESRI; Urban Decision Group; VSI
Fracking Impact on Housing Source: 2010 Census; ESRI; Urban Decision Group; VSI Affordable projects experienced less fluctuations in occupancies and rents
Future Trends • Economy and oil/gas exploration is wild-card • Senior specific-housing • Ex-urban senior housing. • In-fill • Affordable downtown for working class • Suburban ‘mini-downtown’ housing.
Conclusions • Changing demographics are having profound effects on housing. • Apartment demand should remain high due to demands from the two largest demographic groups. • When will Gen Y move to single-family houses? • Can we meet the needs of older adults in the coming decades? • Is it economically feasible for developers to build more senior-tailored affordable housing in rural area?
Andrew Mazak Vogt Strategic Insights andrewm@vsinsights.com www.vsinsights.com (614) 224-4300