Is the housing shortage overstated? In our recently published report,
A Decade Divided, The Troubling Trajectory of Demographics, we challenge the prevailing narrative of a severe housing shortage. Our analysis of declining birth rates, aging populations, and reduced immigration levels are leading to
slower household growth projections for the coming decade.
While the first few years of the decade saw record household growth driven by immigration surges and pandemic-related factors, the market has shifted to a more balanced state with modest oversupply in multifamily housing and modest undersupply in single-family homes.
Our analysis argues that current market conditions indicate reasonable balance between supply and demand overall, while acknowledging ongoing challenges in providing truly affordable housing for the lowest income families.
Demographics Drive a Housing Demand Shift
With the first few years of this decade characterized by record-high immigration, a pandemic-induced desire for more space and independence, and “free money” via government stimulus and record-low interest rates, the early 2020s will go down as one of the most robust periods in history for net new housing demand – with annual household formation nearly doubling the prior 40-year average. From surge to slump, as demographic forces intersected with heightened affordability challenges in recent years, household growth slowed in 2023-25, contributing to fundamental pressure across the housing market. While a ‘stretched but improving’ affordability backdrop should help stabilize the share of young adults living at home, this is countered by a historic slowdown in immigration and unavoidable rise in deaths per year. As such, household growth is likely to decelerate further in the years, and decades, ahead.
The New Housing Equilibrium
Through a relatively favorable lens, while robust household growth early in the decade gave way to typical overextrapolation by builders and developers, exuberance was relatively short-lived and recalibration has been apparent more recently. Taking into account household growth, lost housing stock and expected vacancies, substantial retrenchment in new construction supply from current levels seems unwarranted; meaningful growth is also hard to justify absent much better affordability. In our view, supply and demand are in reasonable balance – not the historic shortage many claim – with the caveat that development of truly affordable product would likely unlock incremental demand if it could be delivered in locations where it is needed most, which is difficult even with government subsidies, and close to impossible without.
Read the full report
here.
Thursday, July 23, 2026 by Ryan McKeveny & Kevin Kaczmarek
Filed under:
New Home Sales
