Economy Watch: Declining US Birth Rate to Impact CRE

While the effects might not be felt for a few decades, a prolonged U.S. birth rate slump is likely to put a damper on demand for certain kinds of real estate, particularly rental apartments.
Source: Centers for Disease Control and Prevention’s National Center for Health Statistics

Though the impact on real estate might be a few decades off, a declining U.S. birth rate will eventually catch up with the industry. Late last week, the Centers for Disease Control and Prevention’s National Center for Health Statistics reported that in 2017, the fertility rate for U.S. women aged 15 to 44 was 60.2 births per 1,000 women. That’s down 3 percent compared with the previous year, and is the lowest rate since the federal government began tracking birth rates more than 100 years ago.

In absolute numbers, 3.85 million babies were born in the United States in 2017, down 2 percent compared with 2016, and the lowest number since 1987, the CDC reported. Previously, the recession drove birth rates down, but they started rising again in 2014—but not for long, as rates have gone down every year since then.

Much of the drop is because of the positive trend of a lower birth rate for teenagers. The rate in 2017 was 18.8 per 1,000 girls aged 15 to 19, down 7 percent from the previous year and nearly 55 percent compared with 2007, and down about 70 percent compared with 1991, the most recent peak. The birth rate among women older than teens has for the most part been dropping as well, though not as much, and the rate among women aged 40 to 44 has increased slightly in recent years.

The impact of a prolonged U.S. birth rate slump will—unless higher rates of immigration take up the slack—ultimately put a damper on demand for certain kinds of real estate. The long-range outlook for rental apartments in particular could be affected for the worse as a smaller generation starts forming households in 20 to 25 years.