Gloves are off in new residential construction’s great demand debate.

The stakes in the game could hardly be more intense. The context here is tens of billions of dollars of investment capital hellbent on yield, and little opportunity so alluring – globally speaking — as residential real estate and its enormous mismatch between a tsunami of younger-adult households in the making and the inadequate number, quality, location, and attainability of homes and communities to shelter them.

Demand – structural, fundamental, demographically-driven, and sustaining – stood as the “given” developers, builders, investors, and their myriad partners could count on whatever transitory headwinds might kick up in a moody economic backdrop.

Which door do you pick?

  • Door No. 1: The National Association of Realtors, based on research by the Rosen Group, estimates a current “underbuilt” level-set at
    Source: Pew Research Center

    Growth in the number of U.S. households during the 2010s slowed to its lowest pace in history, according to a Pew Research Center analysis of newly released 2020 census data.

    The 2020 census counted 126.8 million occupied households, representing 9% growth over the 116.7 million households counted in the 2010 census. That single-digit growth was more anemic than the prior record low percentage growth of households (11%) during the previous decade, as shown in the 2010 census.

    Three Vital Statistics For Housing

    What this means for the U.S. economy may not be fully appreciated. Households, we know, fuel a full one-third of Gross Domestic Product economic activity. They’re the engines of the nation’s outlook, directly impacting residential real estate investment, development, and construction, and indirectly exerting multiplier-effect force on countless related local, regional, and national business fortunes.

    Pew research analysts flag three underlying trends currently resculpting the landscape of household formation, equally material for stakeholders in homebuilding and development.

    • The rate of population growth – a core ingredient of household formation – slowed during the same period to 7%, the lowest rate since the 1930s.
    • Multigenerational households increase – a spike from 12% multigenerational households in 1980, to 20% in 2016 – mutes household formation rates.
    • Further, faster population growth among race and ethnicity groups less likely to form households:

    Asian and Hispanic adults – the fastest growing racial or ethnic groups in the U.S. – are less likely than White and Black adults to live in separate households. In 2020, there were 42.2 households for every 100 Hispanic adults and 41.9 households for every 100 Asian adults.

    Finally, of real importance in where housing demand is headed, a tipping point, the rate at which adults live in their own household fell.

    Overall, the household formation rate declined slightly from 51.5 households per 100 adults in 2010 to 50.9 households per 100 adults in 2020.

    Geographic, occupational, and financial reasons also play into why household formation rates reflect a diminishing return.

    The nature of housing demand itself – an equation that in reality blends wherewithal in a livelihood sense with lifestage with housing preference – may be entering a transitional, transformational era.

    The limbo of the future of work and the future of home may define who’s long on land right now and who’s not.

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