Category: Market Insights

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If you find the current market or the recent inventory crunch overwhelming, prepare for the future. Looking ahead to the decade between 2035 and 2045, our industry is poised to face a demographic challenge unlike any other in a century.

For broker owners, recruiters, and MLOs, this isn’t just some “future tripping” exercise. It is a wake-up call. If you want to thrive over the next twenty years, you need to start pivoting your business model today.

The 5.1 Million Number: A Century-Level Low

We’ve spent our careers assuming that “more people equals more houses.” But according to Harvard’s Joint Center for Housing Studies (JCHS), that engine is losing steam. We are entering the Great Deceleration.

Check out the projected drop-off in new households:

• 2010s: 10.1 million new households (actual)
• 2025 to 2035: ~8.6 million (projected)
• 2035 to 2045: ~5.1 million (projected)

Between 2035 and 2045, household growth is projected to be the slowest of any decade in at least 100 years.

That is the optimistic case. JCHS’s main projection assumes immigration stays near historic levels. In its low-immigration scenario, growth falls to 6.9 million households in 2025–2035 and just 3.2 million in 2035–2045.

This isn’t just a market cycle. It is a structural earthquake.

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Why the Engine Is Stalling

There are three massive forces converging here. As a leader, you need to be able to explain them to your agents and your clients.

1. The Silver Tsunami Comes Ashore

By 2035, every Baby Boomer will be 70 or older. JCHS projects that Boomer-headed households will fall from 52 million in 2025 to 36 million in 2035. These “household exits” come from mortality, moves into assisted living, and moves in with family.

We are shifting from a market of growth to a market of replacement.

Don’t expect one giant wave. This will be a steady, decades-long release of Boomer-owned homes, and it will hit some markets far harder than others.

• The Big Question: As those homes come to market, who buys them? Part of the answer: JCHS projects households headed by Gen Z and younger will grow from 15 million in 2025 to 38 million in 2035. The buyers are coming. They just look different and want different things.

2. The Birth Dearth Pipeline

U.S. births peaked in 2007 and have trended down since. The fertility rate hit a record low of about 1.6 in 2024.

Today’s young buyers come from large birth cohorts, so the impact isn’t immediate. But in the 2040s, the smaller generations born after 2007 reach prime first-time-buyer age. The starter-home pipeline is shrinking, just on a delay.

3. Immigration: The Only Net Growth Factor

In January 2026, the Congressional Budget Office projected that U.S. deaths will exceed births starting in 2030. That is a full decade sooner than its estimate just two years earlier. From that point forward, net immigration accounts for all U.S. population growth.

That doesn’t mean all of your business will come from immigrants. Most transactions will still come from turnover: move-ups, downsizers, relocations, divorces, and estates. But net growth in your market will depend on new arrivals and their children.

If you aren’t marketing to these communities, you aren’t marketing to the future.

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What This Means for Your Business Model

For Broker Owners	For Recruiters	For MLOs
Shift to Services over Sales: The money moves toward property management, senior relocation, and estate services.	Target the Specialists: You need agents who carry the SRES designation or have deep ties to immigrant communities.	Non-Traditional Products: ITIN loans and multi-generational mortgage products will grow in importance.
Inventory Management: The starter-home shortage could finally ease in some markets. Prepare for rising inventory in aging suburbs.	Tech Integration: With a smaller labor pool, you need agents who use AI to handle far more volume than a traditional agent.	Renovation Lending: As new construction slows, the market shifts toward renovation and redevelopment loans for aging stock.

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The Bottom Line: Strategy Over Volume

In the 2035 to 2045 decade, you won’t be able to “accidental” your way into a profit just because the population is growing. Success will belong to the leaders who stop chasing raw volume and start mastering lifecycle real estate.

The question for your next team meeting: Are we positioned to serve the Silver Tsunami, the next generation of buyers, and the new American immigrant? Or are we still waiting for a 1950s-style housing boom that isn’t coming back?

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PS: What Is Household Formation?

While the Census Bureau defines a household by its “front door” (any person or group occupying a separate housing unit), other agencies define it by financial and social ties.

1. The Housing Perspective (Census Bureau and Federal Reserve)

Household formation is the net change in occupied housing units. The Census Bureau sets the definition, and Federal Reserve research uses it to study housing demand.

• The Narrative: It’s driven by demographics (age) and the headship rate (the share of people who head their own household).
• Economic Impact: It is a leading indicator for new construction and big-ticket consumer spending (appliances, furniture).
• Source: Federal Reserve Board: Household Formation Research

2. Alternative Economic Perspectives

Other institutions define households by how money flows rather than where people sleep:

• Consumer Unit (BLS): Focuses on spending. It groups people who share at least two of three major expense categories: housing, food, and other living expenses. Its spending data helps weight the Consumer Price Index (CPI).
• Tax Unit (Treasury, CBO, and researchers): Focuses on legal filing. It covers the people on a single tax return plus their dependents, and it is widely used to measure income inequality.
• Survey Household (World Bank): Focuses on shared resources. Its household surveys commonly define a household as people who live together, pool resources, and “eat from the same pot.”

Summary Table

Definition Type	Primary Entity	Key Driver
Housing-Based	Census Bureau / Federal Reserve	Physical occupancy and “un-doubling”
Spending-Based	BLS	Shared major expenses
Legal-Based	Treasury / CBO	Tax filings and dependency status
Survey-Based	World Bank	Pooled resources and shared meals

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Sources: Harvard Joint Center for Housing Studies, Household and New Housing Unit Demand Projections for 2025–2035 and 2035–2045 (McCue); Congressional Budget Office, The Demographic Outlook: 2026 to 2056 (January 2026); Federal Reserve Board, FEDS Working Paper 2013-26.

Updated October 2026 to reflect CBO’s January 2026 demographic projections.

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This is the discussion I’m having with my clients right now: 

2035… between 2035 and 2045, the U.S. is projected to experience the lowest rate of household formation in 100 years.

Why does this matter? Household formation is the engine of economic demand. It drives the need for new housing, furniture, appliances, cars, and a whole host of services. A slowdown here isn’t just a blip; it’s a fundamental recalibration.

Two powerful demographic waves. One is the “Silver Tsunami” – the massive Baby Boomer generation (born 1946-1964) entering their 70s, 80s, and beyond, vacating homes and demanding more healthcare. The other is the smaller, tech-savvy Gen Alpha, just beginning to form households.

As leaders, recruiters, and top performers in the real estate and mortgage lending space, we have to keep our eyes on the trends shaping the very inventory we sell and finance. And right now, one of the most significant and fascinating shifts is the massive office-to-residential conversion boom, with New York City leading the charge.

This isn’t just about repurposing old buildings; it’s about pioneering new architectural and development strategies that are creating an entirely new playbook for urban real estate across the country.

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The New York Story: From Desk to Doorstep

According to a fantastic piece in the Wall Street Journal (authored by Brian McGill, Max Rust, and Peter Grant, which I highly recommend), New York developers have converted nearly 30 million square feet of office space into homes over the past two decades. What’s truly exciting is that the pace has accelerated since the pandemic.

Why? The perfect storm:

• Sky-High Vacancy: Post-COVID office vacancy soared past 20% in Manhattan.
• Unmatched Demand: Manhattan’s residential market, with its median $4,500 rents for a one-bedroom, provides a strong financial incentive.
• Government Support: Tax abatements and expanded zoning approvals are greasing the wheels.

The biggest hurdle has always been the buildings themselves—too wide, too mechanically complex, and lacking the necessary light and air for livable apartments. But the developers are solving this with incredible ingenuity.

The Architectural Hacks That Change Everything

This is where the true innovation lies, and it’s a masterclass in creative problem-solving we should all be studying. Developers are making transformations possible with “architectural hacks” like:

• Carved Light Wells & Notches: Developers are literally demolishing chunks of a building’s podium (like at 750 Third Avenue) to create a massive ‘notch.’ This brings in the crucial light and air needed for apartments in deep-set office footprints.
• Strategic Wall-Offs: Repurposing the building’s interior core (elevators, restrooms) and hiding structural beams within new inner walls allows for maximum light exposure in the new residential units.
• Code Compliance by Design: As seen in the 750 Third Avenue project, bedrooms are strategically placed near the outer exterior to comply with building codes for sunlight, while interior spaces (where daylight isn’t required) are perfect for bathrooms.

For example, the colossal 750 Third Avenue conversion—a 1958 office building where occupancy plummeted to 17%—will be completed in 2029, delivering 680 apartments and a full suite of modern amenities. This is a massive shift, and its size continues a trend toward larger, more ambitious conversion projects.

What This Means for Our Industry

Even though these conversions will only scratch the surface of New York’s office surplus, the impact on our industry is profound:

1. New Inventory Pipeline: Across the country, the pipeline for future apartment units from office conversions is exploding—up to 78,500 units nationally, per RentCafe.com. This is future rental and condo product for our agents and MLOs to list and finance.
2. A Model for Other Cities: The design breakthroughs pioneered in Manhattan—the cut-through notches, the strategic floor plans—are creating a reproducible “playbook.” This accelerates the pace of conversion in every other major metro area.
3. A Testament to Opportunity: As Robert Fuller, principal of architecture firm Gensler, stated: “There are more case studies that prove the naysayers wrong.” This entire movement is a powerful reminder that opportunity exists in every market condition, provided we are creative enough to find it.

We need to pay close attention to this segment of the market. It represents a resilient response to changing urban needs and a huge opportunity for those of us who understand how to capitalize on adaptive reuse.

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Credit: Insights summarized from “Office-to-Residential Conversions Are Booming and New York Is the Epicenter” by Brian McGill, Max Rust, and Peter Grant, The Wall Street Journal.

Mark Schniepp’s 2026 economic forecast provides a concise overview of critical trends and risks that directly affect the real estate, lending, and construction sectors. Here’s a recap of Mark’s report:

1. Core Economic Projections

The consensus for the U.S. economy points toward continued, albeit modest, growth:

• U.S. GDP Growth: The forecast stands at a moderate 1.8% for 2026, an improvement over earlier projections. This indicates resilient, stable underlying economic activity.
• Global Growth: International Monetary Fund (IMF) projections suggest a slight global slowdown, with world GDP at 3.1%, which may exert a marginal drag on U.S. performance.
• Inflation Outlook: Expected U.S. Consumer Price Index (CPI) inflation is projected to settle in the 2.9% to 3.5% range. The UCLA Anderson forecast specifically targets an average of 3.2%. Controlling inflation remains paramount for monetary policy stability.

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2. Monetary Policy and Upside Risks for Housing

The most significant factors poised to benefit interest-rate-sensitive sectors, primarily housing, are tied to monetary policy flexibility:

• Lower Inflation Scenario: The primary upside risk is inflation proving lower than anticipated. This outcome would permit the Federal Reserve to continue an accommodative monetary policy, which directly translates to lower borrowing costs and increased affordability for buyers and developers.
• Technology Investment: Accelerated productivity gains stemming from continued investment in Artificial Intelligence (AI) are cited as a key driver that could propel overall economic growth beyond baseline estimates.
• Corporate Performance: Stronger corporate earnings and a less volatile global political climate could support heightened stock market values, positively impacting consumer wealth and confidence.

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3. Immediate Impacts and Labor Market Constraints

The Government Shutdown Effect

The recent 43-day federal government shutdown is estimated to reduce Q4 2025 GDP growth by approximately half a point. Crucially, this is viewed as a transitory impact, with the lost output and spending expected to be fully recovered in the first two quarters of 2026.

Structural Labor Challenges

The labor market faces structural headwinds, with no meaningful turnaround in broad job creation anticipated for 2026. This directly affects demand for housing and labor supply for construction:

• AI Displacement: The widespread adoption of AI is expected to challenge job growth, leading to potential contractions in workforces across industries like software development, professional services, and customer service.
• Employment Opportunities: While overall job growth stagnates, specific opportunities are expected in sectors such as healthcare and accommodation and food services.
• AI Vulnerability: A key risk remains the sustainability of AI optimism. Any setback in realizing productivity gains from AI could expose the economy to underlying drags (e.g., policy impacts from tariffs or restricted immigration), reducing potential economic output.

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This forecast underscores that success in 2026 for the real estate and lending markets will hinge on the Fed’s ability to navigate inflation toward its target, enabling continued easing, and monitoring the dual impact of AI on both economic productivity and employment stability.

For the real estate and lending community, the major opportunity is the potential for lower borrowing costs. If inflation proves milder than expected, the Fed can ease policy, directly benefiting interest-rate-sensitive housing demand and affordability. The primary business risk, however, is a stagnant labor market driven by AI displacement in high-earning, white-collar sectors; this necessitates that firms proactively target recession-resilient client bases, such as the healthcare and hospitality workforces, while leveraging internal AI tools for efficiency to thrive in what will remain a competitive, volume-sensitive environment.

The stock market is always looking ahead, but it has a specific timeline for factoring in slow-moving, structural risks like the projected collapse in US household formation. The critical moment won’t be in 2035 itself, but years earlier, when the demographic constraint finally overtakes the current supply constraint.

The source of the concern is clear: The Harvard Joint Center for Housing Studies (JCHS) projects that annual US household growth will slow dramatically. After averaging around 860,000 per year between 2025 and 2035, the rate is expected to drop to just 510,000 per year in the decade following 2035—the lowest growth rate in a century (JCHS, 2025).

Here is the projected timeline for when this structural headwind will be fully priced into stock valuations:

1. Current State: Risk Ignored (2025 – ~2029)

Today, the market views the demographic drop as a problem for “later.” Stock prices for homebuilders and related industries are currently dominated by two near-term cyclical factors:

• The Housing Shortage: The US still has a significant deficit of millions of homes, which creates immense pent-up demand (Morgan Stanley, 2025). This short-term need acts as a demand shield, ensuring builders have a high volume of sales for the immediate future.
• Interest Rates: Fluctuations in mortgage rates have a far more immediate impact on affordability and sales volume than any long-term demographic projection.

2. The Turning Point: Pricing In the Slowdown (~2029 – 2033)

The consensus concern will begin to solidify and be priced in when the existing housing shortage is finally resolved. Analysts expect the higher growth rate of the 2025-2035 period (860,000/year) to be the functional ceiling for new housing demand once the deficit is closed.

• Trigger: As the existing supply gap closes, the stock market will realize that the annual rate of 860,000 households is the new, strict limit for demand.
• Impact: Investors will stop valuing homebuilders, material suppliers, and mortgage lenders based on historical boom cycles and start incorporating the lower 860,000 number into their 5- and 10-year forecasts. This shift will likely lead to widespread valuation resets and mark the beginning of serious concern.

3. Peak Concern: Factoring in the Trough (2034 – 2038)

The actual lowest point of household formation—the 510,000 per year trough—is projected to occur after 2035. The forward-looking stock market will price in this collapse well in advance.

• Confirmation: By 2034–2035, the market will have fully discounted the absolute lowest growth projection. The concern will translate into measurable price action when corporate earnings reports for volume-sensitive industries (e.g., appliances, lumber, furniture) consistently miss expectations due to a verifiable lack of new household volume.

In short, while the fundamental demographic weakness is a problem for 2035-2045, the stock market will begin penalizing the most exposed sectors as early as 2029-2033 when the short-term demand shield from the housing shortage disappears.

The headline from Altos Research for the week ending October 26 is a National Market Action Index (MAI) of 34, signaling a “Slight Seller’s Advantage.” This metric, which compares the rate of sales to inventory, is stable from the prior week. Note – the links included below update in real time, so at the time you review a link provided they will likely differ from this one snapshot in time.

However, a closer look at the data for the nation’s key markets reveals that this “advantage” is anything but uniform, especially when you factor in price. The National Median List Price is $439,900, yet a 42% of all listings have seen a price reduction. This is the clearest indication that buyers are actively resisting inflated prices, forcing sellers to adjust their expectations.

Here’s a concise breakdown of four major states and how their metrics are shaping the U.S. market:

Location	Market Action Index (MAI)	Median List Price	Inventory Units	% of Listings with Price Reductions
National, USA	34 (Slight Seller’s)	$439,900	859,419	42%
California, CA	38 (Slight Seller’s)	$775,000	55,849	36%
New York, NY	38 (Slight Seller’s)	$599,000	22,400	32%
Florida, FL	31 (Balanced)	$484,500	96,623	44%
Texas, TX	30 (Balanced)	$375,000	137,384	44%

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1. The High-Pressure Seller’s Fortress: NY and CA

Markets with the strongest seller leverage (MAI 38) are those with the tightest inventory.

• New York is the most extreme example. With the smallest available inventory (22,400 units) and the lowest percentage of price cuts (32%), competition is still intense. The sheer lack of supply means sellers have a dominant position, despite a $599,000 median list price.
• California is similar, with a high MAI of 38 and an even steeper median price of $775,000. Listings are moving fast, with a Median Days on Market of just 70 days, well below the national average of 113 days.

2. The Buyer’s Opening: Texas and Florida

Texas and Florida are the best representations of the market softening, with MAIs indicating a balanced market with no significant advantage to buyer or seller.

• Texas (MAI 30) offers the most affordability in this group, with a median list price of $375,000. More importantly, it shares the highest price reduction percentage at 44%. This is the market where overpricing is being punished the fastest.
• Florida (MAI 31) also sees 44% of its listings cutting price. Its high Average Days on Market (139 days) is the highest of all regions profiled and signals a much slower pace of sales, putting pressure on sellers.

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Market Insights for Real Estate Professionals and Investors

Real Estate Agent Insight

Your Focus: Accurate Pricing and Inventory Generation

• For Seller Clients: The national 42% price reduction rate is your essential presentation slide. In Texas and Florida (44% reductions), this is a non-negotiable conversation. Do not overprice. Your goal is to price at the market’s leading edge to avoid the longer days on market (DOM) and the inevitable price cut that follows. Focus on the Median Price of New Listings as the most relevant comparable for new-to-market properties.
• For Buyer Clients: The high DOM in Florida (139 days) and Texas (126 days) represents a strategic opportunity. Target homes with price reductions and higher DOM for increased negotiating power. In high-MAI markets like NY and CA, your buyers need to be pre-approved, ready for competition, and focused on homes that have already passed their Median DOM (70 days in CA, 63 days in NY).

Team Leader and Broker Owner Insight

Your Strategy: Recruitment, Retention, and Training

• Training Focus: Shift your training away from “bidding wars” to “pricing consultations.” Your agents need to master the data, specifically the MAI, Price Reductions, and DOM, to win listings. The 44% reduction rate in Texas and Florida is a liability for ill-prepared agents.
• Recruitment/Retention: The fragmentation of the market (NY vs. TX) means a hyper-localized skill set is crucial. Agents succeeding in Texas (selling affordability) will need different training than those in New York (managing scarcity). Provide data-driven tools, like the full Altos reports, to help your agents prove their local expertise against the national narrative.

Investor Insight

Your Target: Cash Flow vs. Appreciation

• Cash Flow (TX & FL): These markets are rapidly normalizing, with inventory and price cuts giving investors a chance to enter at better values. With high price reduction rates (44%) and lower list prices $375,000 in Texas), look for opportunities to negotiate aggressively for properties that have been on the market for over 100 days.
• Appreciation (CA & NY): These markets are too expensive for most new investors, but they remain high-barrier-to-entry, high-appreciation zones due to chronic under-supply. The extremely high Median Rent in New York ($4,700) indicates strong rental demand and potential for premium rental income for those who can afford the initial purchase price.