Homeownership rates are falling as more people decide to rent instead.
The trend could last a decade as young adults delay marriage and the aging baby boom generation downsizes, according to new research by economist Richard Green, director of the University of Southern California’s Lusk Center for Real Estate.
Green previewed his research Wednesday at gathering of real estate executives in San Diego hosted by the Lusk Center.
A panel of prominent developers said the real estate economy is powering back from recession, with capital available for the first time in years for hotel, office and residential projects. The skies are particularly blue for apartment complexes.
“This will be the best decade for multifamily in decades, and for decades to come,” said Green, who illustrated his forecast with fascinating data.
After surging during the housing bubble, U.S. homeownership rates have declined steadily since 2006 and seem likely to stabilize at the historical average of 65 percent.
Yet a stronger economy may not send ownership much higher, Green’s data suggest. The American dream is shifting.
Young people have been waiting until later in life to get married and have children. These are enormously important economic events that drive the decision to buy a house.
Some of the declines in ownership have causes that hopefully won’t last forever, such as high levels of joblessness and student-loan debt.
But another factor may be here to stay: Women are having trouble finding men they see as eligible for marriage.
Although men seem happy to marry women with less education, women are generally reluctant to marry down the educational achievement ladder. And women now surpass men in college graduation rates, a gap that’s growing.
Meanwhile, the baby boom generation has entered the age at which people traditionally sell big houses where they raised their families and buy smaller ones or move into rental homes.
Such trends give renters little to cheer about.
Apartment vacancy rates in San Diego County dropped to an ultralow 2.3 percent in the second quarter, according to the USC Casden Forecast.
Rents increased an average 2.8 percent compared to the same quarter in 2012. Tight conditions could last, with cities reluctant to approve projects and release more land for development.
In fact, a shortage of residential land has developed in prime coastal markets in San Diego County over the last 18 months.
“The price of land has gone crazy,” said developer Tony Pauker of Draper Properties.
The industry is adapting on the assumption that land will be scarce forever in San Diego. New projects increasingly entail redeveloping old sites.
Rising profits have attracted capital to the market, after a long drought since 2008.
Investors are particularly eager to fund projects that are environmentally efficient and combine office and retail space with condos or apartments.
“Two years ago, lots of people were just struggling to stay in business,” said Michael W. McNerney, senior vice president of Lowe Enterprises Real Estate Group, which develops large, mixed-use projects nationwide. “It’s amazing how quickly it’s come back.”
And capital is getting easier to find for big projects downtown, with a major hotel deal expected to be announced in the next 60 days, said Robert Green, a veteran hotel developer (and no relation to USC’s Richard Green).
Improved conditions are also lifting hopes for transforming the East Village area of downtown dubbed the Innovation District.
Backers hope the district will become a home for technology companies, much like the thriving downtowns of Seattle and San Francisco.
Young innovators want to walk or bike to work, stores and entertainment. And they increasingly will pay extra for energy efficiency, solar panels and other green features.
“Downtown San Diego has done a great job with residential and a poor job with job creation,” McNerney said. “We want to help fix that.”
Developers typically have plenty of hope.
For those who are greener and more focused on renters, now there is capital, too.