The L.A. Times reported in the story Tuesday March 1st, 2016 that “Fewer Starter Homes Being Built.” In their story they point out that more developers than ever are building for affluent baby boomers which makes it much tougher for millennials to buy their first home. This seems to be the first time in history that this event is taking place. In the past 40% of new homes were entry level and now it is less than 20%.
While this is truly bad news for those wanting to buy it is great news for apartment owners. As we see a steady increase in the number of millennials entering the workforce it looks like they will have to rent our apartments as opposed to buying a home. Add to that the reality that in most areas of Southern California there have literally been no new reasonably priced apartments built since the 1980’s. This all bodes well for owners of existing rental units. Rents should make steady increases and the vacancy rates should be very low.
If you think it’s a tight market here the March 1st edition of Fortune magazine paints an even worse picture in San Francisco. They pointed out that the “famously not-in-my-backyard restrictive development regulations” have helped create a crippling housing shortage. That has forced the prices of homes up in some areas 70-104% since 2010 according to Zillow.