Introduction
According to an analysis by RealPage, the housing market in the United States is set to benefit from strong and sustained demand driven by demographic trends. By examining data from the U.S. Census Bureau and Pew Research Center, as well as statistics from the National Association of Realtors (NAR), RealPage offers insights into how generational shifts shape the future of housing demand.
Generational Dynamics and Their Impact on Housing Demand
RealPage’s analysis incorporated data on population by age groups, categorizing them into the Silent Generation (1928-1945), Baby Boomers (1946-1964), Generation X (1964-1980), Millennials (1981-1996), Generation Z (1997-2012), and Generation Alpha (2013+). Each of these generations has had a profound impact on the housing market over time, and today’s trends continue to evolve based on the size and behaviour of these generational cohorts.
At their peak, the Baby Boomers represented a massive demographic wave, with 78 million people in this generation—a figure that dwarfed Generation X, which peaked at 64.5 million people. The Millennials, now the largest generational group after the Boomers, peaked at 73 million. Gen Z, still emerging into adulthood, trails slightly with a peak of about 68 million.
These generational shifts are significant because they directly influence the demand for housing. As Baby Boomers age and transition out of homeownership or relocate to smaller, more manageable living spaces, the housing needs of younger generations like Millennials and Gen Z are rising dramatically. These generations are in or approaching their prime home-buying years, providing a robust foundation for ongoing housing demand.
Renting vs. Buying: Key Age Groups in the Market
One of the critical factors RealPage examined is the median age of apartment renters and first-time homebuyers, as provided by the NAR. The median age of US apartment renters is 32, while the median age of first-time homebuyers is 35. These statistics align closely with Millennials, the largest group currently driving housing demand.
Millennials, in their 30s and 40s, are increasingly transitioning from renting to buying as they establish families, secure more stable careers, and accumulate wealth. This age group’s movement into homeownership is expected to intensify demand for single-family homes, especially in suburban and exurban areas with more space. At the same time, the rising cost of homeownership keeps many Millennials renting longer, sustaining demand in the rental market.
On the other hand, Gen Z is just starting to enter the housing market as renters, with many beginning their careers and looking for affordable living options. As this generation matures, its impact on the housing market will grow, contributing to sustained demand for rentals and starter homes.
The Long-Term Outlook for Housing Demand
The demographic landscape suggests that housing demand will remain strong in the coming years, mainly driven by the size of the Millennial and Gen Z populations. These groups will continue to age into key renting and buying years, creating steady demand across rental and homeownership markets.
Moreover, with Millennials and Gen Z facing rising housing costs, including higher mortgage rates and limited supply in some areas, renting may remain a long-term option for many. This dynamic will keep demand high for rental properties, particularly in urban and suburban markets where younger generations tend to cluster.
In the long term, even Generation Alpha, the youngest demographic cohort, will eventually enter the housing market, adding another layer of demand over the next two decades. As the U.S. population continues to grow and evolve, so will the need for a diverse range of housing options to meet the needs of these younger generations.
Challenges Ahead: Affordability and Supply Constraints
While demographic trends signal long-term solid housing demand, the US housing market faces significant challenges that could impact homebuyers and renters. Affordability remains a crucial issue, especially as rising interest rates, increasing home prices, and limited inventory put pressure on prospective buyers. Millennials and Gen Z, representing a large portion of current and future demand, are grappling with the financial burden of buying homes in a competitive market.
The lack of available housing inventory has also exacerbated affordability concerns. With fewer homes, buyers often engage in bidding wars, driving prices even higher. According to industry analysts, housing supply shortages could persist for years, making it difficult for many first-time buyers to enter.
Responding to these challenges, some Millennials and Gen Zers are delaying homeownership and renting longer. This trend helps sustain demand in the rental market, but it also pressures rental prices, which have been steadily increasing as more people remain renters by necessity rather than choice.
Despite these challenges, experts believe that as supply gradually increases and the market adjusts, there may be some relief for buyers and renters alike. However, policymakers and developers will need to focus on creating affordable housing solutions to meet the needs of the growing population and ensure that future generations can access rental and homeownership opportunities.
In summary, while demographic trends point to strong demand, the housing market must navigate significant affordability and supply constraints to fully meet the needs of younger generations, whose housing choices will shape the market in the coming decades.
