Aging America could cool housing market after years of shortages

Aging demographics may help slow U.S. home-price growth after years of tight supply and intense competition, according to a new Mortgage Bankers Association report. The shift could give younger Gen Z buyers a better market later, while many millennials remain squeezed by high prices, low inventory and older owners who are slow to sell.

The MBA said national home prices rose 55% from 2020 to 2025 as too few homes met demand from millennials and older Gen Z buyers moving into prime homebuying years. The trade group now expects prices to rise 1% this year, compared with a 4% increase in 2024, and to flatten over the next two years.

Realtor.com has estimated the U.S. housing shortage reached 4.03 million homes last year. Its data also show baby boomers still hold a central role in the market, accounting for about 42% of home purchases and 52% of sales, while first-time buyers made up 21% of buyers, the lowest share in more than 40 years.

Demand may weaken as the population ages

The MBA report points to slower household formation as the main reason the market could loosen. The group cited an older population, lower fertility, smaller groups of young adults and reduced immigration as forces that could slow the rate at which Americans create new households.

That would mark a change from the post-pandemic pattern, when limited listings and strong demand kept prices elevated. The MBA projected housing supply could grow by 10.6 million to 14.6 million units from 2026 through 2035, compared with projected demand of about 11 million units over the same span.

The timing matters. Younger Gen Z adults who have not yet reached peak buying age may benefit if demand cools and supply improves over the next decade. Millennials, many of whom are already in their late 30s or early 40s, may not get the same relief.

Cristian DeRitis, deputy chief economist at Moody’s, previously told Fortune that younger generations might find more available homes, but that the outlook may not change much for buyers already in their late 30s or early 40s.

Construction and ownership patterns still limit supply

Supply problems remain a major constraint. Goldman Sachs has calculated that productivity in U.S. construction has declined 0.6% annually since 1965, and researchers have linked weak homebuilding to slow technological change and tighter local rules that reduce incentives to build.

High interest rates have added pressure in recent years by discouraging some owners from moving and making financing more expensive for buyers. The MBA’s demand-side forecast does not mean homes will become plentiful quickly, especially if older owners continue to hold properties.

Redfin data show baby boomer empty nesters own almost twice the share of large homes as millennial families. Realtor.com has reported that many boomers want to age in place, relying on home care rather than moving to senior housing or smaller properties.

A Redfin survey last year found about one-third of boomers said they never plan to sell their homes, while another 30% said they do not expect to sell for at least 10 years. That behavior could delay any demographic easing in the market.

Population trends could reinforce the shift later. U.S. birth rates have declined for nearly two decades, according to federal data cited by Fortune, and the Congressional Budget Office expects net migration to turn positive again in coming years. Brookings Institution experts have warned that if the U.S. becomes less attractive to international migrants over the long term, the country could face population decline.

This story draws on original reporting from Fortune.