Are homebuilders considering Gen Z and falling birth rates?

A conversation with Molly Boesel and Maiclaire Bolton Smith

We hear it all the time: there’s a housing shortage. Prices are high, inventory is low, and affordability feels out of reach. But those challenges reflect today’s market pressures.  

The future of housing isn’t just about numbers on a chart today, it’s about people and their futures. Understanding shifts in demographics and anticipating where the market is headed will be key to building for the future.

Beneath the headlines, the U.S. is experiencing a demographic shift — birth rates are falling, the population is aging, and Gen Z is bringing new expectations to how and where people want to live. These forces don’t just influence demand; they have the potential to reshape the housing market for decades to come.  

In this episode of Beyond the Buildings, host Maiclaire Bolton Smith sits down with Cotality’s Chief Economist Molly Boesel to unpack how these demographic forces could reshape the future of the housing market and what it could be for affordability, supply, and the very way we think about real estate.  

In this episode:

2:25 – What comes next for the housing market after the current shortage is resolved?  

4:40 – After building homes, what happens if no one is there to live in them?  

6:23 – How are housing characteristics evolving alongside demographic shifts?   

9:39 – Are builders taking into consideration construction trends based on demographics?  

15:33 – How will multi-generational houses change the property market?  

17:53 - Erika Stanley breaks down the numbers on housing affordability in The Sip. 

20:40 – What will U.S. housing market demographics look like in 20 years?

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Transcript

Molly Boesel:

If we fast forward 20 years, the median age of homeowners will be in their early to mid-fifties. That's up from their forties. Now, most households won't have children.

Maiclaire Bolton Smith:

Welcome to Beyond the Buildings By Cotality. I am your host Maiclaire Bolton Smith, and I'm just as curious as you are about everything that happens in the property industry. On this podcast, we satisfy our collective curiosity, explore questions from every angle, and look beyond the obvious. With every conversation, we illuminate what is possible. We hear it all the time. There's a housing shortage, prices are high, inventory is low, and affordability seems like a dream. But here's the thing. All of that is based on current demand. What happens when we look a little further down the road? Beneath the surface, the U.S. is facing a significant demographic shift. Birth rates are falling, the population is aging. Fewer families are having children. Gen Z is entering the market with different priorities than their parents. The way we are living now is just different than it was 50 years ago, and it'll be different in another 50 years. So to talk about how demographics will influence the future of the property market, we have one of our favorite guests back with us today. Molly Boesel from Cotality's, office of the Chief Economist. Molly, welcome to Beyond the Buildings.  

Molly Boesel::

Thank you Maiclaire. I'm excited to be here as this is my favorite time of the quarter.

Maiclaire Bolton Smith:

I know, me too. I love doing this with you.

Erika Stanley:

Before we get too far into this episode, here's a friendly reminder about how to see what's coming up next in the property market. To make it easy, we curate the latest insight and analysis for you online, find us using the handle at Cotality on all our social media channels. But now let's get back to Maiclaire and Molly.

Maiclaire Bolton Smith:

Okay. We are constantly hearing about this housing shortage that we have here in the U.S., but the thing is, it's based on current demand. And the other thing that we need to consider and that we keep hearing is that the future, we've got a shrinking population. So Molly, what is the relationship between these two? Are we creating all these properties that no one's going to use in the future?

Molly Boesel:

Okay, let's just assume there's no housing shortage at all right now. But that's a pretty big assumption because any estimates I read, say about one and a half to five and a half million housing shortage currently. So big assumption, but let's just say there's no shortage, right? There's just enough houses to go around for everyone who wants one right now. So, future population growth would mean we'd need more houses in the future because we'd have more households. So that would be more building. But if we have a population that's growing and then maybe shrinking in the future, we won't need as many houses.

Maiclaire Bolton Smith:

That makes sense. However, we do have a shortage. So how much, I guess, okay, let's look at it from this perspective. All of the demographic shifts indicate that the population is going to decline just based on current birth and death rates.

Molly Boesel:

Exactly.

Maiclaire Bolton Smith:

How much are we expecting the decline to be over the next, let's say even 50 years?

Molly Boesel:

So, if you use the current birth and death rates, but you also include immigration, the current immigration will still have growth for almost the next 50 years. The population will start to shrink in 50 years, but let's say one of those factors is less, fewer births, fewer deaths, less immigration, then we'll see the population shrinking a lot sooner. But I think the more important thing is either way it goes, that growth is going to be close to zero in about 10 years from now.

Maiclaire Bolton Smith:

So every time I leave my house and drive anywhere, I see construction projects everywhere and houses are going up, I think at an astronomical rate. So I think we are doing so much to add to the housing stock here, at least where I live in Southern California, and I know it's the same across the country. So what's going to happen when we have all of these extra properties and not necessarily people to live in them?

Molly Boesel:

Well, that's a really good question. So I think, well, it really depends. So when the thinking about housing turnover, you're in just enough houses to go around, you're assuming that there's houses everywhere where everybody wants to live in the country. So what you might be looking at is in an area where people are moving to, so they're migrating to that area. And we see a lot of that, especially in areas that are a little cheaper in the us. Not saying where you live is cheaper, but it might be relatively cheaper than somewhere else. So we have a lot of households, a lot of owners that have benefited from a couple of decades now of price increases that have increased their home equity they have in their home. And so they're able to sell their homes cash in that home equity from their really high cost areas and move somewhere a little cheaper. And that's when you need those new houses in those areas. So again, all these projections are national level. They just assume people will just pick up and move wherever there's a free empty house, so that it's not really the way it works.

Maiclaire Bolton Smith:

Yeah, no, absolutely. And I guess, I mean, I understand too that some of them may be being built in lower cost areas, but that's not always the case. A lot of these new construction new builds, they have a really high price tag on them, so they aren't necessarily a more affordable option for people. So how does that factor into things?

Erika Stanley:

The idea of a starter home may be a relic of the past now, even though square footage for new builds is decreasing slightly, prices are continuing to trend upward. Read more about this phenomenon at Cotality.com/insights. A link is in the show notes.

Molly Boesel:

So along with the change in the number of people in the U.S., do you have a changing age demographic as well? So what you could be seeing is people who bought into the housing market their first time by was 10, 20 years ago, they may be ready for that move up by maybe they've had more children. We can talk about later what multi-generational households they may need space for those as well. So they just might need that extra, extra space.

Maiclaire Bolton Smith:

I guess I want to talk more about square footage because I think, are we still seeing this typical starter home, three bed, two bath, 1200 square feet, white picket fence, single family home? Is that still what people are gravitating to start with? Or are they going straight in for, I just need the big home that I'm going to be in forever, or I need a home that can accommodate, or, I mean, you and I have talked about Gen Z trends in other podcasts as well too. Are they looking for something to accommodate some creative living arrangements as well? What are we seeing? Are there trends that we're seeing in terms of square footage and do we think that that's going to change, or how might that change over time with different demographic changes as well?

Molly Boesel:

That is a great question because I don't think there's any one answer to that. So when you look at the people who are maybe in their mid thirties or mid forties right now, they might be happy with that bigger home already in the housing market, they've already purchased a home. When you're looking at someone who's still looking to buy, prices have been going up for, like I said, a couple decades now. Mortgage interest rates are six point a half to 7% that's making houses or the monthly payment less affordable. So they may need to look for something a little smaller that they can afford. So I think that's a lot of what's driving those smaller homes.

Maiclaire Bolton Smith:

Yeah. Do we still see people, are people looking for these? Yes. If they may be looking for smaller homes, are we still seeing a demand for things like condos and the more multifamily residences? Is that still a demand?

Molly Boesel:

Yeah. So when you look at the younger generations, they're just in the beginning of their careers, gen Z. Now, the median age for a Gen Z is 21 years old, and that is really kind of hard to think about because you still think of 'em as being pretty young, but 21 years old, that's the median age for Gen Z.

They're just getting out of college, starting their careers. They're not looking to buy anytime soon. Their home ownership rates are pretty low for that age group, but they, you're primarily your renters and they're primarily going to be in those multifamily type properties.

Maiclaire Bolton Smith:

Sure. Yeah. I guess if we look at it from the construction industry perspective, are builders and are they taking into consideration their construction trends based on demographics? Do we know or are they just going to keep building at astronomical rates because that's what they do as builders?

Molly Boesel:

Yeah. So builders follow all these same trends, right? They use these same demographic projections in their planning process. But the one thing builders are faced with right now is that big shortage. We started talking about that beginning of the podcast. They've got to find a way to try to close that gap, but they'll probably work to close that gap by building for what people want in the future. Those smaller homes, more accessible for one level type of homes. So that's really where the demand's going to be.

Maiclaire Bolton Smith:

And it'll be interesting to see how that's changed, because even just over the course, the last, I would say even 10 or 15, definitely 20 years, I feel like it's really gone from this building, single family, single story homes, or maybe just bi-level or two story homes to the move to a lot of three story townhouses and a whole bunch of them in a big complex and a lot of properties within a small area.

Molly Boesel:

Right? Exactly. So you can take a lot if you're able to subdivide that, you can fit a couple homes on that, or maybe a few town homes, maybe something like a multilevel apartment building where each family lives on one floor. So, there are a lot of options out there, but I think we got to rethink. Builders need to rethink, localities, need to rethink these zoning laws they have.

Maiclaire Bolton Smith:

Molly, as soon as you say zoning, it opened my mind up to, we are really focused on how things are done here in the us. And when we look at other countries around the world, they do things very differently. Just look at Europe. Europe is, people don't want these 3000 square foot monstrous single family homes. There's a lot of apartments and town home style, a lot of people within smaller structures and even multi-generational families living in apartments. And that's just normal.

Molly Boesel:

And it's not the focus on homeownership. So when you have meeting the needs, you asked earlier, are we meeting the needs of all the generations? We need to maybe think more about renting for some of these populations, young and old, right?

Maiclaire Bolton Smith:

Yeah. Yeah. It's interesting to see how it has changed. I look back to, in my childhood, I didn't even know what a townhouse was. I don't think it was even a term. There were duplexes, there were fourplexes, but anything that was higher multifamily that wasn't an apartment or condo, they didn't really exist. And now they are some of the most common build structures and high occupancy areas that people live.

Molly Boesel:

Yeah, you could fit a lot of townhouses in one area, and it is a nice option, especially for someone who doesn't mind having 2, 3, 4 levels in their home. You get a lot of space in a townhouse.

Maiclaire Bolton Smith:

Yeah, no, absolutely. So I guess let's look at the other end of the spectrum, Molly. We've talked a little bit about the younger generation. What if we look at the older population, many people that are in this older population are on fixed incomes, but affordability is still so important and becoming a bigger and bigger issue and concern. How do these two things fit together? So the demand for housing for seniors, but that they may be on a fixed income. What do we know about that?

Molly Boesel:

Yeah, when you look at the way our age structure of our population's going to be in 10, 20 years. You really have to look at the older population. Nine in 10 new households over the next two decades will be headed by someone who's over 65 years old. So there's a huge growth in that population. So you got to think about the kind of homes they need. They are on fixed incomes. Are they going to be able to afford a home? Do they want to move, sell their home, cash in their equity, maybe start renting or get a condo, something with more services. But you did mention maybe though they can just barely afford their home they're in. And we've talked to many times on this podcast about insurance cost increases, property tax increases, and that's hard for everyone, but it's especially hard for those households who are on those fixed incomes and won't be able to absorb the shock of that payment.

Maiclaire Bolton Smith:

I mean, that is being a hot topic that we've definitely done a lot of thought leadership around is how insurance is becoming really a barrier to home entry. And specifically for people on fixed incomes, it's becoming more and more difficult for them to be able to stay in a home because of increased, like you've said, to property taxes and insurance rates. I guess when we look at these, not just the seniors, but as we're all getting older, what about we have the millennial generation that are really, if you look at rates, they're having less children than they ever have and had in the past. So in theory, they may need less space.

So what does that mean in terms of the future housing demand? Are we creating all of these big houses that maybe people aren't going to need or want that much space?

Molly Boesel:

So yeah, you do have a decline in birth rates, so that's a need for smaller homes. You also have, with the aging of the populations, that's just the decline in birth rates. It's that as a population ages, they had children and now they've launched. Right?

That's the big dream to launch your kids, and you'd need a smaller home at that point. So yeah, maybe not as much demand for these smaller homes, but I did mention earlier about multi-generational households. There is projected to be a pretty large growth in multi-generational households, and that's not what we normally think of as I got my adult child living with me. No, that would be, I have my parent living with me, and I'm the one who owns the home. So those large homes, maybe just what that type of family needs with extra bedrooms and bathrooms and a lot of space.

Maiclaire Bolton Smith:

Well, here's a twist in that as well too, is I know that during the pandemic, we saw the move for people needing more space because so many people were working at home. Exactly. And Molly, you and I are in this category, but now we are starting to see a lot of people return to offices and not needing this office space in home. And I think when we look to future trends as well, will this work from home be the norm, or will it people be back to how we were 10 years ago where everyone went to an office every single day and didn't necessarily need the extra space for offices within their homes? So I think that's a trend that could play into this as well.

Molly Boesel:

And with houses, home prices increasing. If you don't need the space, you might not want to pay for it, and you might not be able to pay for it.

Maiclaire Bolton Smith:

Sure. Yeah. Because it does come with a huge, huge ticket on it.

Molly Boesel:

Huge price tag, right?

Maiclaire Bolton Smith:

Yeah. Yeah. I think to one of our colleagues here actually just downsized and had the home that he raised his family in, they had six children, so they had this massive house and they've now downsized to something smaller. But it took a long time for that house to sell because there weren't people looking for that much space in the area where they lived. And it ended up being a multi-generational family that bought that house because it was somebody that needed space for them and their parents and them, their kids, and their parents to all have their own space within this home. So potentially a trend that we may see over time as well.

Molly Boesel:

Oh yeah.

Maiclaire Bolton Smith:

Yeah, definitely. Yeah. Interesting.

Erika Stanley:

It is that time again, Cotality just dropped new numbers on housing affordability. Here's what you need to know. If you're looking to buy a home, you can expect to find a small number next to the square footage, but a big number next to the four sale sign. Cotality data found that the size of new homes fell 10 square feet per year over the last five years due to supply issues, land prices and regulation. Home prices, though are forecast to rise 4.9% year over year. Instead of purchasing a 1500 square foot standard, home buyers are now turning into long tenured renters. While it is a cheaper option, it can still be pricey. Cotality identified the average rent increased 3.7% over the past year for higher end units. To find out more about the new average median price to afford a newly built home visit Cotality.com/insights. There's also a link in the show notes, and that's the sip. See you next time.

Maiclaire Bolton Smith:

So Molly, we've talked about a lot of shifting trends and the housing market needing to adapt. Do we think it will adapt fast enough for how things are changing over even if we just look in the next 10 to 20 years?

Molly Boesel:

Yeah, that's a big question because with the current housing shortage, it's been really difficult for builders to fill that. So the speed is not really on their side there. But maybe if there's some more zoning changes or people get more used to the idea of smaller homes with smaller yards and all of that, in one lot, we could probably fill some of this gap. But closing this current shortage is really going to be the primary thing that builders are thinking about.

Maiclaire Bolton Smith:

I mean, this could be over the course of several decades as well too, but do we ever foresee a shift going in the direction of some other countries around the world, or do you think that it's always been the American dream to have this white picket fence, single family home? Do you feel like we'll ever move away from that?

Molly Boesel:

I think owning will still be part of the American dream because it's nice to own your own home. You have control over how much you pay for the most part. But also you see, just looking at the people who built up this equity in their homes, that's a huge part of their wealth.

Maiclaire Bolton Smith:

Yeah,

Molly Boesel:

Definitely. I think a lot of people would like to get in on that and owning is the way to do it.

Maiclaire Bolton Smith:

Yeah, no, that definitely makes sense. Okay, Molly, pull out your crystal ball and we're not even going to look too far if we just look 20 years.  

Molly Boesel:

This is an easier one than we usually do.

Maiclaire Bolton Smith:

If we are going to look just even 20 years down the road to 2045, what does the US housing market look like in terms of demographic trends? Like what's going to hold, who will be buying homes and what do those homes look like?

Molly Boesel:

Alright, so if you look at the current trends, if we fast forward 20 years, the median age of homeowners will be in their early to mid fifties. That's up from their forties. Now, most households won't have children, but because a majority of the households will already be in their peak owning years, so peak owning years are in their mid fifties, they will, there'll be a lot of trade up buying, move up buying, or maybe move down buying. So not as many first time home buyers in the market 20 years from now.

Maiclaire Bolton Smith:

Alright, well, let's come back in 20 years, Molly, and see.

Molly Boesel:

Oh, I would love to.

Maiclaire Bolton Smith:

And see if that holds true, but we will definitely have you back before 20 years as well. Molly, I can't wait to do this with you again. But thank you for joining me today so much on Beyond the Buildings by Cotality. Thank you very much, and thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life producer Jessi Devenyns, editor and sound engineer Romie Aromin, our facts guru, Erika Stanley and social media duo, Sarah Buck and Makalia Brooks. Tune in next time for another conversation that illuminates the ideas that will define the future.

Erika Stanley:

You still there? Well, thanks for sticking around. Are you curious to know a little bit more about our guest today? Molly Boesel is a senior principal economist in the office of the Chief Economist at Cotality. She is responsible for analyzing and forecasting housing and mortgage market trends, including the single family rental market. She has a depth of experience in mortgage market analysis, model development, and risk analysis in the housing finance industry. Her original research appears on the Cotality Insights blog, which can be found at Cotality.com/insights.

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