LOS ANGELES—“As difficult as the market is right now, and as difficult as it is for development, there are 80 million Millenials out there with an average age of 26, which makes them price renters.” Those thoughts are according to Bob Champion, founder, president and managing partner of Champion Real Estate Co. At a recent RealShare event here in L.A., when talking about the multifamily market, Champion said that if you take that metric and forecast that the present demand that exists will continue to exist, things aren't so bad.

“On the supply side, in the last 10 years, there have been 140,000 units built in California, which has been a short fall of 100,000 units each year.” So, why is that happening, he asked? The main causes are from things like entitlement issues, community opposition, lack of availability of land in coastal land etc.

Champion said that this year, the rent to income ratio will be 44%, the highest it has ever been. “And Axiometrics predicts that by 2020, every renter in L.A. will be spending 50% of their gross income on their rental.”

In the short term, Champion predicted that, as crazy as it sounds, rents will continue to grow because developers are designing more efficient units that are smaller and they can keep the rent down.

Another thing that is happening, Champion said, is that there are changes taking place in the renter lifestyle. “We are seeing two roomates share a one-bedroom apartment.” And some Millennials, he said, are choosing to stay home because they can't afford in the current marketplace.

Another thing Champion expects to see is more suburban apartment development. “It has to happen because they will be priced out of the market,” he said.

But the red ceiling will occur, Champion said. “If we are projecting 5% annual rents today, next year could be 4% and the year after could be 3%. Every time you reach this situation, something happens that resets the market.”

Click the below articles for related pieces from the recent RealShare Apartments Conference.

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