By Prashant Gopal | Bloomberg
For the past decade, scarcity was the US housing industry’s most powerful marketing tool. The less there was to buy, the greater the urgency to keep bidding, even as prices hit record highs.
Demand was supercharged by record-low pandemic-era mortgage rates that sparked bidding wars and sent prices soaring, crushing affordability. Recent estimates of the national housing shortage have ranged from 1.5 million to 7.3 million units.
But a new era may be dawning, in which a shortage of buyers, not homes, is the defining feature, according to a new white paper from the Mortgage Bankers Association. Starting in 2030, deaths in the US are projected to outnumber births, meaning that without immigration — now being throttled by the Trump administration’s crackdown — the population would begin to shrink, according to the Congressional Budget Office.
“The next decade is likely to be quite different,” said Mike Fratantoni, the MBA’s chief economist and a co-author of the paper. “We’re moving from a time of rapid household formation to one where there’s a slowdown.”
That outlook is far from certain given all the variables such as a future administration that could decide to expand immigration and a stronger labor market that could boost household incomes.
For now, affordability remains the market’s biggest constraint. Many young adults don’t have the money to buy a home and, in some cities, struggle to rent without roommates or financial help from family.
Affordability has become a rallying cry so loud that it has bridged the political divide. Last month, Republicans and Democrats worked together to pass a bipartisan housing bill designed to address the shortage in affordable housing and lower costs for buyers and renters. The bill’s fate is uncertain after President Donald Trump abruptly canceled its signing.
Still, the forces that fueled the housing market frenzy are now reversing. Mortgage rates, in the mid-6% range, aren’t likely to return anytime soon to the sub-3% levels of late 2020. The country’s fertility rate has fallen to a record low. Baby boomers, the oldest of whom are 80, are poised to start adding to supply as they downsize or die. In addition, immigration is severely restricted and deportations have cut net international migration by half in 2025 and likely even more this year.
Many builders currently have too much inventory, especially in Sun Belt states such as Texas, Arizona and Florida, where they’ve been most active. Multifamily completions hit a 38-year high in 2024, flooding the market just as demand is cooling. The rental vacancy rate rose to 7.3% in 2025 from 5.6% in 2022, according to the MBA report.
Fratantoni and his co-authors warn that a shrinking population will upend conventional thinking about “housing supply adequacy” and raise doubts that “the supply shortage that defined the post-2010 housing narrative will remain the right framework for the decade ahead.”
National house prices are starting to adjust. After rising 55% from 2020 to 2025, a shrinking pool of potential buyers has the MBA projecting growth of only 1% in 2026 and flat home prices over the next two years.
Even if it’s not a recipe for a broad market crash, continued construction could cause values to drop in some places. For the mortgage industry, oversupply and falling prices would mean fewer loans for new purchases and less demand for refinancing.
Other analysts are seeing similar evidence of changing demand for housing. An assessment released last month by Harvard University’s Joint Center for Housing Studies found that household growth fell to 1.1 million in 2025 from 2 million in 2021, the third straight year of decline as young people double up with roommates or live with family rather than go out on their own.
“The demand slowdown is coming,” said Alexander Hermann, senior research associate at the Joint Center. “That’s a real thing.”
But a weaker appetite for homes overall doesn’t mean everyone can find one. According to the National Low Income Housing Coalition, 11 million extremely low-income renter households are competing for just 3.8 million homes within their reach.
There remains a severe shortage of units for households in the lower- and middle-income brackets, Hermann said. “I don’t think we’ve made any progress on that,” he said. “If anything, that circumstance has only worsened.”
A few months ago, Ali Wolf, chief economist at homebuilding consultancy Zonda, spoke before a gathering of clients and laid out a sobering picture: The country was still adding jobs, but at a slower pace, and the population was still growing, but at one of the slowest rates on record.
A builder asked a question that caught her attention.
“He said if job growth is slow and if population growth is slow, how do we grow our business?’” Wolf said.
Since then, she’s been marshaling resources to answer it, building an index that ranks nearly 100 metropolitan areas on expectations for long-term demand. Her team is meeting with builders to explain what it means for their regions.
When the immigration crackdown began, builders braced for the obvious blow: the loss of the workers who frame their houses and pour their foundations. But a drop in apartment construction since then has eased that pressure.
“We thought we were going to get hit by labor supply,” Wolf said. “And actually, our biggest concern has been housing demand.”