Walker Webcast: Ivy Zelman Suggests Housing Market Is More Balanced Than Narrative Claims

The typical narrative is that the U.S. housing market has a shortage of three to four million homes.

However, housing analyst Ivy Zelman suggested during the Sept. 2 Walker Webcast that the market may be closer to equilibrium than the estimates indicate.

“Our view is that the current supply is meeting the level of household growth,” said Zelman, executive vice president and co-founder of Zelman, a Walker & Dunlop company. The webcast was hosted by Willy Walker, Walker & Dunlop chairman and CEO.

The Household Formation Argument

The main reason behind Zelman’s view is slowing household growth, driven in part by demographic trends that contrast with more optimistic projections from many economists.

She pointed out that birth rates are below replacement levels, immigration has stalled, and while death rates are improving, the absolute number of deaths continues to rise.

“We will continue to see, call it incrementally, 50,000 incremental vacancies coming from deaths and aging out,” she said.

Zelman also challenged the assumption that the millions of young adults currently living with their parents are on the cusp of forming new households. The share of 20- to 39-year-olds living at home has risen to 22.4%.

Affordability, inflation, remote work and greater social acceptance have made living at home more acceptable. “I think the negative stigma of living in your parents’ basement is gone,” Zelman said.

She added that a 100-basis-point change in the share of young adults living at home can translate into roughly 500,000 households of annualized demand, a metric that is especially important to housing forecasts.

But the demographic outlook is not all bad. Zelman said aging households will help generate housing turnover, while wealth transfers are assisting some younger buyers.

“We’re seeing an increase in cash purchases, it’s roughly 30% right now,” Zelman said, compared with the National Association of Realtors’ historical range in the low-to-mid 20% range.

“I think cash sales are indicative of parents helping out,” she said.

Multifamily: Better Fundamentals, But Consider the Markets

While multifamily is oversupplied in some markets, Zelman suggested the property type is better positioned than its for-sale counterpart. But she cautioned that housing is regional, with supply-heavy Sun Belt markets continuing to struggle while markets with limited new construction report stronger rent growth.

San Francisco is showing improvement, as are Tampa and even Miami. Midwest markets also continue to report healthy rent growth.

Another fundamental is incremental growth in renter households, driven primarily by affordability.

While acknowledging that comparing rent costs with starter-home expenses is an apples-to-apples comparison, Zelman said there was a $900 monthly differential after factoring in property taxes, HOA fees, mortgage insurance and homeowners insurance.

Looking Ahead

While Zelman’s thesis challenged some conventional housing assumptions, she forecasts multifamily rent growth of 1.5% in 2026, rising to 2.6% in 2027 and 3.7% in 2028. Those projections assume interest rates remain elevated and there is little to no reduction in inflation.

“We’re optimistic that lease-up competition is improving,” she said. “The use of incentives has been plateauing in terms of concessions. So, as we read the tea leaves, we do see that markets will show improvement.”

There is also pent-up demand on the investment side. Zelman suggested that underwriters who base decisions primarily on cap rates might be better off examining fundamentals such as renter household formation and homeownership affordability.

As a result, improving multifamily fundamentals could be more realistic than a sudden increase in homeownership.

“People do need shelter,” she said. “Even if young adults aren’t moving out as early as they’ve done, there are incremental households, and I think multifamily will be the beneficiary of that.”

On-demand replays of the Sept. 2 Walker Webcast are available through the Walker Webcast channels on YouTube, Spotify and Apple. Subscribe to get invites, replays and articles for new Walker Webcast episodes every week.