Housing Demand Faces Historic Slowdown Due to Aging America

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Published Date 1/13/2025

Home prices never seem to do anything but go up. And as Real Estate News’ DaveGallagher reminds us, the housing shortage in the U.S. is seen as a key driver of high home prices and a contributor to the country's affordability crisis.

But, he says, if household growth slows in the coming decades, supply will catch up — leading to a significant shift for the homebuilding industry. “Growth patterns are already changing: In the 1990s, 13.5 million new households formed; during the 2010s, growth fell to 10.1 million — and the slowdown is expected to continue,” he reports, citing a new report from Harvard University's Joint Center for Housing Studies.

Gallagher’s research tells him that population growth could come to a halt in a decade. “Over the next 10 years, just 8.6 million new households are expected to form, and between 2035 and 2045, the pace could slow to 5.1 million, the research suggests. If that proves to be true, it would represent the fewest new households of any decade in the last 100 years.”

He cites demographic shifts as the culprit: “According to population data from the U.S. Census, the number of children under age 5 decreased by almost 9% between 2010 and 2020, while the number of seniors over 62 increased by more than 36%,” he says. The report’s author, Daniel McCue, adds that if the trend continues, in the coming decade, rising mortality and fewer births among an aging population are expected to first slow and then turn negative the growth in the native population. That will leave future population growth entirely dependent on future immigration.

The demand for newly-built homes is expected to remain fairly strong in the short term, however, as the report estimates 11.3 million new homes will be built between 2025 and 2035 — more than the 9.9 million units built in the 2010s, but less than the 17 million built between 2000 and 2009.

Ten years from now? New home construction is expected to slow, with the report forecasting 8 million units built between 2035-2045. “That's because Gen Z and Gen Alpha — the next big wave of homebuyers — are smaller than the baby boomer and millennial generations, said Robert Dietz, chief economist at the National Association of Home Builders,” he says, adding that the demand for remodeling and tear-down work will increase as the housing stock ages.

"So when you put it all together… it suggests that the back half of this decade will have a good runway for growth in order to reduce the existing deficit," Dietz said, adding that the 2030s will be a time of adaptation for homebuilders.

Immigration, however, is hard to predict. For forecasting purposes, McCue used net immigration levels of 873,000 per year, similar to levels seen in the 2010s. "But even under significantly higher assumptions for future immigration, household growth is expected to decline over time due to the projected decline in natural population growth," he wrote.

Dietz says it's too soon to say what immigration levels will look like in the next 10 years. “Much will depend on the Trump administration's policies, enforcement efforts and budget allocations around immigration. In the coming months, we're going to get a sense of what this will involve, not only for housing but also the impact on sectors that typically depend on immigration for their workforce," Dietz said.

Also a factor cited in the report: By 2035, the number of households headed by a person over 80 is expected to increase by nearly 60%, which will likely mean more multigenerational households as well. Households that include an adult and their older parent(s) are projected to rise from 4.8 million in 2025 to 6.3 million in 2035.

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