A new report warns that housing supply could outstrip home buyer demand by 2035

For years, America did not have enough homes to meet the growing demand. Soon, there may not be enough buyers.

A new report from the Mortgage Bankers Association says the housing market is approaching a major demographic shift. After more than a decade of demand outstripping supply, slower population growth and an aging population are expected to reduce demand for new housing, potentially changing forecasts for housing construction, housing prices and affordability.

That would mark a big change from the past decade.

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Millennials, the nation’s largest generation, entered their prime home-buying years after the financial crisis, driving a housing boom that builders are struggling to keep up with.

As demand outstripped supply, home prices rose. The pandemic has exacerbated inequality as low mortgage rates spawn another wave of buyers.

According to the report, slow population growth, low birth rates, an aging population and declining immigration are expected to result in fewer people looking to buy or rent homes over the next decade, as builders continue to add new homes.

THE HIDDEN PROBLEM IS KEEPING AMERICANS FROM BUYING HOMES.

Newly built homes are connected to residential developments in the Sun Belt’s fast-growing market. Housing and infrastructure have become key issues as more Americans migrate to the region. (Smiley N. Pool/Houston Chronicle/Getty Images)

If that happens, some markets could end up with more homes than buyers, giving more choices to potential buyers and making it harder for sellers to ask higher prices after years of seller approvals, especially in the post-COVID era.

That doesn’t mean all markets are headed for the downside.

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The report notes that the houses are always on the high end. States including Texas, Florida and Arizona, where construction has accelerated, could see softer prices if supply continues to grow.

Conversely, parts of the Northeast and Midwest, where new construction remains lagging, may continue to experience strong price appreciation.

Real estate industry leaders say states that have prioritized housing construction are better positioned to deal with population growth and economic expansion. (Photos by Joshua Lott/Bloomberg/Getty)

Researchers also reject the idea of ​​a predicted “silver tsunami” of Baby Boomer homes flooding the market.

Instead, they expect those properties to come onto the market gradually over many years, adding to the housing stock without causing sudden overcrowding.

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Still, the change could have real consequences for homeowners. If builders continue to add homes faster than demand grows, home price gains may be slower, homeowners may build less equity, and buyers may have more choices, according to the report.

Read the full report: