Slower Household Growth Projected for the Next Decade, Homeownership Rates Likely to Plateau

A new study from the Joint Center for Housing Studies (JCHS) at Harvard University forecasts a significant slowdown in household growth over the next decade. Between 2025 and 2035, the annual increase in homeowner households is expected to range from 337,000 to 685,000, while the number of renter households will rise by 174,000 to 523,000 each year. These projections suggest a major cooling in household formation, with total growth averaging just 859,000 households annually, well below historical trends.

This slowdown reflects shifting demographic patterns that could have significant implications for both the housing market and broader economic conditions. The JCHS report also examines potential fluctuations in homeownership rates across three different scenarios. The results indicate modest changes in the homeownership rate, ranging from a 0.8 percentage point increase (bringing the rate to 66.8%) to a 1.6 percentage point decline (dropping to 64.3%). The base scenario holds the homeownership rate steady at 65.9% over the next decade.

Homeownership Growth Slows

In the base scenario, homeowner household growth is projected to average 560,000 households per year from 2025 to 2035, which is about 18% lower than the historical average of 685,000 annually since 2000. This slowdown is attributed to a variety of factors, including demographic shifts, affordability barriers, and higher home prices.

On the other hand, renter household growth is expected to average 299,000 households annually, which is nearly 50% below the long-term average of 524,000. This shift suggests that a large number of younger people, who may have historically become homeowners, will continue renting longer due to the current housing affordability crisis.

Three Potential Scenarios for Homeownership and Renting Trends

The study considers three different scenarios for future housing trends, each presenting a different path based on various economic and demographic factors:

Average-Trajectory Scenario

This scenario assumes that younger generations will eventually buy homes at historically average rates. In this case, homeowner household growth reaches 685,000 per year, matching historical norms.

However, renter household growth would slow significantly to just 174,000 per year, a 67% drop compared to the long-term average. This reflects the tightening of rental markets as fewer renters transition into homeownership.

Low-Trajectory Scenario

The low-trajectory scenario assumes that persistent affordability challenges will continue to hinder younger buyers, leading to a decline in the overall homeownership rate by 1.6 percentage points.

In this scenario, homeowner growth would slow drastically to just 337,000 per year, representing 51% below the long-term average.

On the flip side, renter growth would rise sharply to 523,000 households annually, aligning with the long-term renter trend and reflecting a continued strong demand for rental properties.

Base Scenario (Status Quo)

Under this scenario, the overall growth of households both renters and homeowners remains moderate, as current trends continue without significant disruption. This balanced path shows that household formation remains steady, though the pace is slower than in previous decades.

Implications of Slower Household Growth

“The projections highlight the breadth of the housing challenges faced across the country, showing how both homeowner and renter household growth are expected to fall short of long-term averages,” said Daniel McCue, Senior Research Associate at JCHS. “The most likely scenario, based on current trends, points to a low-trajectory future driven by affordability barriers. However, a sudden change in conditions such as a significant drop in mortgage rates could substantially alter these projections.”

As of now, the most plausible outlook suggests continued resilience in renter demand, but a much slower rate of homeowner household growth. This trend will likely keep the housing market tilted toward the rental sector, making it increasingly difficult for middle-class and younger households to achieve homeownership.

For prospective homebuyers, the future may look bleak unless affordability improves dramatically. Meanwhile, rental demand is expected to stay strong, pushing rents even higher in many metro areas, particularly as fewer people transition from renting to owning.

What Does This Mean for the Housing Market?

If these trends hold true, the housing market will face ongoing challenges. The slowing growth in homeowner households suggests that homeownership rates could stagnate for the foreseeable future, with many people opting to rent for longer periods, unable to afford the rising costs of homeownership.

The impact of these trends will also be felt in the broader economy, as homeownership has long been a key driver of wealth-building for families. With fewer households able to afford homes, the potential for wealth inequality to widen remains a real concern.

The key takeaway is that supply constraints, coupled with affordability issues, are likely to keep the housing market in a holding pattern. Solutions, such as addressing zoning restrictions and increasing the supply of affordable housing, will be necessary to reverse these trends and ensure that more Americans can afford to own a home in the future. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.