A significant demographic shift is projected to alter the landscape of the U.S. housing market over the next decade. Projections from the Congressional Budget Office (CBO) indicate that by 2033, the number of deaths in the country will surpass the number of births, a turning point that could fundamentally reshape housing demand and supply for generations to come.
For decades, a chronic housing shortage has defined the market, creating intense competition and driving up prices. However, this long-standing dynamic may be on the verge of a historic reversal as population growth is expected to slow dramatically, potentially leading to lower long-term demand for homes.
Key Takeaways
- The U.S. is projected to see more deaths than births annually starting around 2033, according to a Congressional Budget Office report.
- This demographic trend is expected to lead to structurally lower demand for homes as family formation declines.
- An increase in housing inventory is also anticipated as the Baby Boomer generation ages, with an estimated 9 million fewer Boomer households by 2035.
- Analysts suggest this shift could have a disinflationary or deflationary effect on home prices over the long term.
- The trend may also change housing preferences, with less demand for large suburban homes and more for smaller properties.
A Looming Demographic Cliff
The foundation of this potential market shift lies in stark demographic projections. A report from the CBO released earlier this year outlines a significant slowdown in U.S. population growth over the next three decades. The report projects an average annual growth rate of just 0.2 percent, a steep decline from the 0.9 percent average seen between 1975 and 2024.
The most critical forecast is the point at which the nation's natural population growth turns negative. By 2033, deaths are expected to outnumber births, meaning that without immigration, the U.S. population would begin to shrink.
The Role of Immigration
The CBO report highlights that net immigration will become an increasingly vital driver of population growth. From 2033 to 2055, immigration is projected to be the sole source of population increase in the United States, offsetting the natural decline from more deaths than births.
This demographic change is linked to several factors, including falling fertility rates. Experts suggest that current economic pressures, including the high cost of housing, are forcing many younger Americans to delay starting families, which contributes to the declining birth rate.
How Demographics Could Reshape Housing Demand
Real estate analyst Nick Gerli, CEO of the analytics platform Reventure App, argues that this demographic trend will create significant headwinds for the housing market. He points to a future of "structurally lower homebuyer demand" as a primary consequence.
"Declining births and family formation lowers the need and urgency for young people to buy houses," Gerli explained. This suggests a fundamental change from the demand-driven market of recent decades.
"Many participants in the housing market are ignoring this issue... However, serious homebuyers and investors should dig in and understand how the demographic decline will impact their area."
The shift could also alter the types of homes buyers seek. With fewer people raising large families, the demand for sprawling five-bedroom houses in the suburbs may wane.
"One of the main relative advantages conferred by buying a house, compared to renting, is the space and stability it provides for raising a family," Gerli noted. "If there’s fewer people raising a family... there will be less demand for the 4/5 bedroom house that’s 3,000 square feet."
This could mean that so-called "McMansion-style neighborhoods" may not perform as well in the future, while demand for smaller, more manageable homes could see a relative increase.
The Great Inventory Unlocking
While demand is projected to soften, housing supply is expected to increase significantly from a source other than new construction: the aging Baby Boomer generation.
Baby Boomers and Housing Supply
A Freddie Mac estimate projects there will be approximately 9 million fewer Baby Boomer homeowner households in the country by the year 2035. This transition will steadily release a substantial number of existing homes onto the market as this generation downsizes, moves into assisted living, or passes away.
This influx of inventory, combined with weakening demand from younger generations, creates a formula for a market rebalance. According to Gerli, this dual pressure "will likely have a disinflationary and/or deflationary impact on home prices over the long-term."
This effect is expected to be widespread, touching every state from California to Florida. While high-growth states may seem insulated, Gerli warns that no region will be entirely immune. He points out that even Florida is already seeing an organic population contraction, with 4 percent fewer births.
A Future of Uncertainty and Opportunity
While the demographic data points toward a significant market correction, the future is not set in stone. Population trends can change, and historical precedents exist for demographic rebounds.
Gerli acknowledges this possibility, noting the post-war baby boom of the 1940s and 50s when the U.S. fertility rate soared by 56 percent over two decades. "Perhaps something like that could happen again? We don’t know for sure," he said. "However, the current trends suggest a continuation of the slowdown in births."
For now, the projections from federal agencies and market analysts paint a clear picture. The demographic forces that have fueled decades of rising home prices are slowing and, in some cases, reversing. This could usher in a new era for the U.S. housing market—one defined not by scarcity and bidding wars, but by a surplus of inventory and stabilizing, or even falling, prices.
This long-term outlook presents a complex scenario. For younger generations struggling with affordability, it could eventually offer a path to homeownership that has seemed impossible. For existing homeowners and investors, it signals a need to reconsider the long-held belief that real estate values only move in one direction.
