Rents continue to Rise: Why, suddenly? What's next?
Across the country, we now have an affordable housing 'crisis'. How did this happen? Did every young person suddenly decide to form a household outside of mom & dad's house? Yes.
This demand curve for housing units was predicted by demographics and birthrates starting in 1995-2001. 20 to 26 year olds are the largest new population in our economy. At this age, people find their 'wings and fly the nest'. Is it any surprise that suddenly we have a shortage of affordable housing.
What happened in 2001 to reduce the US birthrate? 1. 9/11 panic, the economic pause and uncertainty which followed. People don't reproduce in such 'scary times'. 2. A sudden stop in inbound US immigration. This reduces birthrates as well. This reduced mobility continued for 5-7 years after 9/11 (September 11, 2001).
Look for the 'housing crisis' to slow down, and an oversupply of homes to hit the market within the next 3-5 years, but in the meantime... deep value markets like Pontiac, MI where the average housing price is 1/3 of neighboring communities will outperform more mature and expensive markets. Why? Value.
Young people will go where they can afford more housing for less money. They will have the energy to improve and renovate homes. This capital spend will further improve these low cost markets. You've watch this trend in other cities which were downtrodden and now are darlings (Brooklyn, Ferndale, West Loop Chicago, etc).
Lastly, unprecedented Federal stimulus money is not flowing evenly across the country, and it is hitting municipal bank accounts July 2021. Watch it distort markets in wild ways! Pontiac got $37 million, Flint $99 MILLION. Detroit $800 MILLION. What did expensive housing markets get... $0. These are huge sums of money, that will be poured into small un-liquid economies, which disruptive effects. If spent on affordable housing or infrastructure, the least can become the best markets.
Follow the Government Money and Demographics.