DemographicsNational Housing Market Outlook

Will the strongest housing demand surge in 20 years continue? 

Eric Finnigan photo

Eric Finnigan

June 16, 2023

While the number of adults in America grew at the lowest rate in decades from 2020–2022, household formations actually surged—the opposite of what we expected—to 1.5 million per year. 

The orange columns below show household creations due to population growth. The blue columns show household formations due to changes in living patterns. 

Adult population growth typically drives the bulk of new households. In fact, 83% of the new households from 2011 to 2019 came from a growing adult population (+862K per year, on average). The remaining 17% of new households came from people needing their own space (+174K per year, on average).  

Since the pandemic, the importance of these drivers of new households has flip-flopped. Changes in living patterns and people needing their own space drove the surge in housing demand. 

We attribute changes in living patterns and the unexpected housing demand surge to the new ability of millions of workers to work from home. Remote workers needed more space, more privacy, and fewer roommates. Without a daily commute, remote work allowed workers and families to move to lower-cost areas.

In 2020–2022, we noticed the following: 

  • Low adult population growth. Household growth attributed to US adult population growth averaged 395K per year over the three-year period covering 2020, 2021, and 2022. This is the slowest growth since the 1950s and a huge decline from the 718K households per year average increase attributable to population growth over the prior three years (2017, 2018, 2019).
  • High household formations. US adults formed an average of 1.5 million additional households per year in 2020, 2021, and 2022. This is far more than expected, with almost 80% of the growth due to fewer people per household. We attribute this shift to the work-from-home starting in March 2020. Mandated returns to the office may shift the growth in some of these households down.  

 

What’s in store for housing demand? 

The following chart of population growth expectations by age shows that millennials and boomers will continue to drive home purchase growth by 35–49 year olds, and 65+ year olds will continue to move to a retirement home or age-in-place and remodel. There will be fewer people aged 50–64 in 2030 than in 2020. 

Also, work-from-home is here to stay for millions of workers, driving demand for homes and living arrangements that give workers (and their families) more space. Despite news of prominent CEOs calling wayward office workers back to headquarters, a survey of employers shows they are increasingly planning for remote/hybrid work arrangements to be permanent. 

Apartment REITs were early to point out their renters’ shedding roommates and taking the extra room for themselves. We are monitoring for signs that residents are moving back in with roommates or renting less space. So far, we haven’t seen it. 

Affordability and a Fed determined to fight inflation are the biggest headwinds to housing market demand right now. 

Expect solid demographic housing demand through at least 2030. 

  • Permanent work-from-home boost. Work-from-home arrangements mean workers and their families will need additional space, boosting housing demand even more. 
  • More homes are needed. Rebounding adult population growth will fuel new household formations and new housing demand through the rest of the decade. JBREC expects the US adult population (age 20+) to grow by +18 million from 2020 through 2030. 
  • Suburbs and exurbs will grow the fastest. +7.3 million additional 30-to-49-year olds between 2020 and 2030 will push demand for housing into the suburbs due to people moving from more expensive urban areas and needing more space.

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About The Author

Eric Finnigan photo
Eric Finnigan
Vice President of Demographics Research
Eric leads demographics research at JBREC, including the US Demographics Insights and Strategies suite. He focuses on helping clients plan around demographic shifts that impact housing and the overall economy.

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