For more than a decade, housing industry policymakers, researchers and other stakeholders have worked to address a persistent housing shortage in the U.S. Still, new demographic and market trends suggest the housing landscape may look markedly different in the years ahead, according to a new Mortgage Bankers Association (MBA) white paper released Monday.
The paper, “Implications of a Persistent Slowing in Housing Demand,” examines how shifts in population dynamics, construction trends and affordability pressures are reshaping the balance between housing supply and demand.
“Over the past several years, growth in housing demand has slowed as new housing supply has entered the market in many regions,” said Mike Fratantoni, MBA‘s senior vice president and chief economist who co-authored the paper.
“While affordability challenges remain significant, MBA’s research highlights the importance of looking beyond today’s market conditions to understand the long-term forces shaping housing demand. These findings can help industry participants and policymakers better prepare for future changes in housing and mortgage market dynamics.”
Along with Fratantoni, the report is authored by Joel Kan, MBA’s vice president and deputy chief economist; Judie Ricks, MBA’s associate vice president of commercial real estate research; and Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America.
The paper found that after the financial crisis of the late 2000s, strong millennial household formation drove housing demand that outpaced new construction. This contributed to rising home prices and rents, pushing up estimates of a national housing shortfall that range from 1.5 million to 7.3 million units.
During the COVID-19 pandemic, historically low mortgage rates further accelerated demand, pushing home prices and rents higher even as builders ramped up construction, particularly in multifamily housing and in markets in the South and West.
By 2025, the report stated, conditions began to rebalance as demand cooled and newly built housing came to market. Vacancy rates increased, rent growth slowed and for-sale inventory expanded, especially in Sun Belt markets.
The paper also notes that housing affordability, while still strained in many areas, has recently improved as income growth has outpaced gains in home prices and rents.
Looking ahead, MBA researchers warn that demographic trends — including an aging population, lower fertility rates, smaller younger adult cohorts and reduced immigration — are likely to slow household formation over the next decade.
At the same time, housing supply is expected to rise gradually as aging baby boomers transfer homes to younger generations.
If construction remains elevated while household formation slows, the report cautions that supply growth could outpace demand in some markets, putting downward pressure on home prices.
The findings also carry implications for the mortgage industry, including potential effects on origination volumes, borrower equity accumulation and overall credit performance.
This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.
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