Pandemic’s Effect on Housing Market Has Perfect Timing

California Builder Services (CBS) recently released a report identifying the trends that are shaping the future of California housing development projects in 2022 and beyond. In the short term, government stimulus and recovery measures for the housing market in 2020 were able to salvage a market that

could have otherwise been on the brink of another 2007-level collapse.

Analysts note a housing correction every decade, meaning that the pandemic’s effect on the housing market, was “perfectly timed”, given a correction was seemingly around the corner regardless. This stagnation can and will impact multifamily starts for the next few years. However, from that point a few years down the road, the housing market will be in a new cycle to grow for the following decade. So from 2023 or 2024 until the mid-2030s, there could be steady growth in multifamily starts in California, particularly to house a new generation of Gen Zers ready to either rent or own a place. This will be coupled with growth in the rate of homeownership among Millennials.

Although, yes, the foreclosure moratorium helped many working and middle-class families throughout the pandemic, there are likely to be fewer long-term benefits for educated Millennials looking to upgrade living situations. That is unless they look to the Central Valley and Inland Empire, more affordable places to live in the state.

Increased wages and perpetually lower interest rates will be driving factors that would aid this generation in buying more homes to grow families, especially given the lower birth rate. The birth rate dropped 4 percent in 2020.

According to data from Morning Consult, nearly three in five childless Millennials say they don’t have kids because it is too expensive to raise them. Fewer children will mean more disposable income to pay for a mortgage, at least theoretically. And if this trend continues, new residential development may climb in a few years when the constraints of the pandemic are almost fully in the rearview mirror and builders adapt to the demands of the next generation of homeowners.