The Demographic Reckoning: The 2035 Housing Trough

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.