Changing Dynamics – June 29, 2026
The ratio of housing supply to housing demand may look very different in the years to come
Even before the COVID-19 pandemic brought the issue of U.S. housing supply to the forefront, policymakers, researchers and industry stakeholders worked on addressing the nationwide shortage, especially in the area of affordability. Will this gap between supply and demand continue in the long term?
That’s a question that the Mortgage Bankers Association (MBA) is raising in a new white paper, which suggests that the housing landscape may look quite different in the years ahead. Implications of a Persistent Slowing in Housing Demand examines how demographic, economic and housing market trends have evolved since the financial crisis and assesses the implications for future housing demand.
Written by MBA chief economist Michael Fratantoni, deputy chief economist Joel Kan, associate VP, commercial research Judie Ricks and associate VP, housing economics Edward Seiler, the report analyzes changes in household formation, housing construction, affordability, and population growth. It delves into the ways in which slowing demographic growth may affect housing supply-demand balances, home prices and mortgage market activity over the coming decade.
“Over the past several years, growth in housing demand has slowed as new housing supply has entered the market in many regions,” said Fratantoni. “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.”
Key findings from the white paper include the following:
- Following the financial crisis, strong millennial household formation contributed to housing demand that outpaced construction, resulting in rising home prices and rents and estimates of a national housing shortfall ranging from 1.5 million to 7.3 million units.
- During the pandemic, historically low mortgage rates accelerated housing demand and further increased home prices and rents. Meanwhile, homebuilders responded with increased construction activity, particularly in multifamily housing and in the South and West.
- By 2025, housing market conditions began to rebalance as demand cooled and newly constructed housing entered the market. Vacancy rates increased, rent growth slowed and for-sale inventory expanded, particularly in Sun Belt markets.
- Housing affordability remains strained in many markets but has recently improved as income growth has outpaced increases in home prices and rents.
- Demographic trends — including population aging, lower fertility rates, smaller younger adult cohorts and reduced immigration – are expected to slow household formation over the next decade.
- Housing supply is likely to increase gradually as aging Baby Boomers transfer homes to younger generations.
- If residential construction remains elevated while household formation slows, housing supply growth could outpace demand growth in some markets, placing downward pressure on home prices.
- Slower housing demand growth could have important implications for the mortgage industry, including effects on mortgage origination volumes, borrower equity accumulation, and credit performance.
“Looking ahead, demographic trends are weakening the foundations of housing demand,” according to the white paper. “Household formation is expected to slow over the next decade due to population aging, low fertility rates, smaller younger adult cohorts and reduced immigration. Aging Baby Boomers are unlikely to flood the market with inventory, but home transfers will moderately add to supply over time. If construction remains elevated, supply growth could outpace demand growth, pushing home prices lower.”
The point here isn’t that new supply is no longer needed, or that it will become unnecessary in the long term. It’s that the thinking around supply/demand balance will need to evolve.