What are the implications of millennials' homeownership trends on the real estate market?

The trends of millennials moving into homeownership at a modest pace due to affordability issues have implications on the real estate market. This trend sustains the demand for multifamily units. However, the slower pace of millennials transitioning into homeownership could potentially lead to a decrease in demand for single-family homes. This could also influence the investment strategies of real estate investors and developers, who may need to focus more on multifamily properties or properties in smaller metros and suburbs where affordability is more achievable for millennials.

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Because of slower economic growth in 2022 and 2023, apartment demand in the U.S. is projected at 240,000 units in 2020. Millennials continue to move into homeownership at a modest pace due to affordability issues, but multifamily demand remains sufficient enough. New York Metro's 9.2% year-over-year (YoY) drop in multifamily investment was partly caused by the implementation of new rent control regulations. Greater Los Angeles had a 9.8% drop in investment YoY, but the San Francisco Bay Area had a 7.4% increase. Buying or building in the suburbs remains the best bet based on market performance and investment returns. Investors and developers should consider smaller metros – under 2 million population.

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