Are rents sustainable?

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One of my agents was in my office yesterday wondering whether current rents are sustainable.

She happens to be looking for a new apartment and can’t believe 1/1s are going for $1350 in City Terrace.

In my opinion, rents are very sustainable and, if anything, likely to increase. Why?

During the Great Recession, tons and tons of prime-age renters were unable to find work and were therefore forced to live with their parents. Here’s a chart:

%age of kids living with parents

 

I’m not expert on Millenials (I’m 35, but act like I’m 123), but my guess is that, as the economy continues to improve, young people are going to want to move out of their parents homes and into their own. Seems reasonable to expect the rate reflected in the chart above to drop back down to its historical average of 26-27% (from 30-31%).

More young people moving out on their own means more renters. And that means more demand in a city where it’s very, very difficult to add more housing.

So I think we’re going to continue to see upward pressure on rents for the foreseeable future.

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