Copyright© 2016 Fannie Mae 1

Multifamily Market Commentary – March 2016 

The Future of Multifamily: Generation Z

Some members of the post-Millennial generation – or “Generation Z” – are getting ready to form their own households over 

the coming decade. What will their housing needs be? How will they compare with baby boomers and Millennials? Most 

likely, they won’t be very different at all, at least when it comes to multifamily demand. 

Today, there are more than an estimated 65 million people under the age of 16. Over the next decade, the oldest of this 

cohort will start forming households. As the chart below shows, about 70 million people will be between the ages of 20 and 

34 by 2024. And if they are anything like previous generations, a sizable percentage of them will become renters of 

multifamily housing. Despite all the new multifamily construction going on today, there might not be enough of the right 

rental housing, in the right locations, to meet the demands of this generation.

A More Moderate Employment Future for Generation Z

The demographic forecast for Generation Z is fairly robust. But the jobs picture is vastly different, as the chart below shows. 

According to Moody’s Analytics forecasts, non-farm employment looks relatively stable over the next four years, with well 

over one million new jobs annually. Yet, they forecast significant decline in job growth in 2020 and again in 2021 – to fewer 

than 750,000 new jobs each year. In addition, forecasted job growth appears to remain slow but steady for much of that 

decade, at less than 1.2 million new jobs each year. That’s just as Generation Z is reaching adulthood and entering the 

workforce. 

Anticipated job growth does start improving a little further out into the forecast, starting in 2027. But over the longer term,

the expectation is that job growth between 2027 and 2045 will return to a more normalized trend. That could be well below 

the current post-recession level of more than two million jobs per year. 

Population Forecast for 20-34 Year Old Cohort 

Source: Census Bureau
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Longer-Term Household Growth Lower but Stable

Despite the lackluster forecast for employment growth, overall household formations over the long term are expected to be 

somewhat subdued but positive, as the chart below shows. The bulk of new household formations traditionally come from 

younger-aged cohorts. So it would not be unusual to see a slowdown in household formations just as Generation Z comes 

of age. There are fewer of them in comparison to baby boomers and Millennials, most of whom have already formed their 

households. 

New Multifamily Supply Short-Lived Over the Short Term

There are more than 582,000 apartment and condominium units currently underway. But we expect that amount of new 

multifamily supply to be short-lived. As the chart below shows, the bulk of this construction should come online this year, 

with the remainder completing in 2017 and 2018. 

Number of New Jobs by Year

Source: Moody’s Analytics

Number of New Households by Year

Source: Moody’s Analytics
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Submarket Concentration is a Concern

Complicating matters over the short term, there is a concentration of most of this new multifamily supply in about 12 major 

metros, as the chart below shows. At a national level, this amount of new multifamily development is not entirely unfounded. 

For example, Moody’s Analytics expects about 1.8 percent job growth in 2016. That would mean an addition of 2.6 million 

new jobs. With that number of new jobs, the demand for new multifamily rental housing could be as high as 520,000 

additional units. But with the concentration of new supply in just a few metros and further concentration in certain 

submarkets, there is a slight mismatch between the growth markets for jobs and the areas receiving substantial new 

development. That is why supply may outpace demand in several submarkets over the next few years. 

National Condo and Apartment Completions and Units Underway

Source: CBRE-EA/Dodge Data & Analytics. NOTE: Pipeline data is not an actual forecast of activity. It is a monitor of activity reported on to date. 

As more projects are planned and tracked, figures in future periods might go up. 

Multifamily Apartment Units Underway – Select Metros

Source: CBRE-EA/Dodge Pipeline, January 2016 – Metros with 4,000 or more units underway and/or completed in 2015. 

NOTE: Pipeline data is not an actual forecast of activity. It is a monitor of activity reported on to date. As more projects are planned and 

tracked, figures in future periods might go up. 
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Gen Z Should Help Drive Future Multifamily Demand

As the chart below shows, 37 percent of those aged 25-34 rented multifamily units in 2014. We believe it is likely that the 

rental pattern will continue to be the same for Generation Z as for previous generations. So it is not unreasonable to expect 

that a similar percentage of Generation Z – at least 35 percent of them at the low end – will become multifamily renters. 

Over the long term, that should help produce enough demand to absorb most of the vacant units lingering in some

oversupplied submarkets; however, it is uncertain what the job growth will be in these metros in 10 years, and more 

importantly, whether Gen Z will want to live in these submarkets.

Future Generation Z household formations should produce sufficient multifamily demand. But it is important to keep in mind 

that this demand may occur a little further out in the forecast than some property owners would like to see. We believe 

multifamily property owners and developers should see Generation Z multifamily housing demand start accelerating again 

after 2021. 

Age 25-34 Single-Family and Multifamily 

Occupied Dwellings

Source: MBA 

Quarterly Multifamily Housing (2+) Starts - SAAR

Source: Moody’s Analytics
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National Multifamily Long-Term Outlook Remains Stable

Moody’s Analytics’ forecasts for a general slowdown in job growth and new household growth between 2019 and 2021 may 

not be good news for developers. But that should give members of Generation Z time to create pent-up demand as they

resume forming new households as job growth improves.

Most of today’s multifamily development is taking place in core and downtown submarkets in a handful of major metros. 

These are places where Millennials and some baby boomers say they want to live, work, and play. But what about 

Generation Z? The expectation is that they will want the same amenities and lifestyle as the Millennials. But they are

sophisticated users of technology. They may feel less constrained about where they can live, if social media and technology 

allow them to live anywhere. And they might not choose to live in urban centers, but in the suburbs, exurbs, or even more 

rural areas. If that happens, there could be a dramatic shift in the location of future multifamily demand – to very different 

metros and submarkets than today. 

But overall, Generation Z helps provide a more stable outlook for multifamily further out into the long-term forecast. Despite 

a more subdued job growth forecast, there will be a healthy overall number of people in the Generation Z cohort. And that 

should provide ongoing, steady demand for multifamily rental housing over the coming decade, although the location of the 

bulk of that demand is not clear.

Kim Betancourt

Director of Economics

Tim Komosa

Economist Manager

Multifamily Economics and Market Research

March 2016

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Multifamily Economics and Market Research 

Group (MRG) included in these materials should not be construed as indicating Fannie Mae's business prospects or 

expected results, are based on a number of assumptions, and are subject to change without notice. How this information 

affects Fannie Mae will depend on many factors. Although the MRG bases its opinions, analyses, estimates, forecasts, and 

other views on information it considers reliable, it does not guarantee that the information provided in these materials is 

accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these 

views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by 

the MRG represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie 

Mae or its management.