North America is experiencing a new trend in the housing market. Rather than building an increasing number of new family homes, there is a shift taking place that is popularizing the number of apartment units being constructed in cities across the country. According to a recent article in the Wall Street Journal, this shift is due in large part to the number of young millennial workers who are finally able to gain meaningful employment and move out of their parents' homes.
The Wall Street Journal states that, according to census data, construction began on approximately one million residential units last year, and of these, about one-third were apartment complexes or multi-family units. This equates to the highest share we have seen since data collection began in 1970. These units are constructed as the result of the rising demands of young adults who want to leave their parents' homes but do not yet have the funds necessary to purchase new or existing homes of their own. Additionally, tightened lending standards mean that many of these millennial workers simply cannot qualify for a mortgage when they are ready to leave the nest. Add this to the mounting student loan debt that many of these individuals have obtained and the lower than average wage gains that many will see in the coming years, and it is easy to understand why apartment living is an attractive alternative to owning a home.
While past reports on the job outlook for young workers were less than favorable, experts are cautious to recognize the good news coming in the form of recent statistics regarding the job market. According to reports by Reuters, employers added approximately 175,000 jobs to their payroll in February, 2014 and 129,000 new employees in Janaury, 2014. This is a positive trend compared to the recent economic slowdown we have seen, and it could mean a viable increase in the demand for new homes across America.
In addition to an increase in jobs across the country, Reuters further reports that the average hourly wage for employees has increased more than we have seen in the past eight months. Payroll cuts are also on a decline, lending to a favorable picture for the United States economy and the housing market that is so closely associated with it.
While these trends are in line with the construction industry's bet that millennial workers will be leaving the nest in greater numbers this year, Jed Kolko, chief economist at Trulia, warns that 'young people don't get a job one day and buy a home the next. The improving jobs picture for young adults will mean more renters this year, not a surge in first-time home buyers.'? Another way to look at this is that younger workers are ready to declare their independence, but they are unable or unwilling to commit to home ownership. Renting is a safer option for those who are proceeding cautiously on their career track and still unsure about their longer term financial outlook.
The construction industry continues to make note of these economic indicators and move forward with building an increasing number of multi-family units for potential renters across the United States. Only time will tell if the current trends and upward mobility in the United States job market will continue, and the builders' bets on apartment living will ultimately pay off. If the climate of the job market does continue on a favorable path, this boom in construction will prove not only positive for those seeking housing alternatives, but it will also continue to add new jobs in the construction industry that ultimately benefit the United States economy. We will all continue to watch business publications to monitor the relationship between the economy and construction growth closely, and to see if this trend is a lasting one that ultimately benefits our country in many ways.