The shortage of affordably priced properties for sale and the economic uncertainty found across the U.S. are leading many young people to rent instead, or even delay moving out of their parents’ homes.
These trends could contribute to a further slowdown in the housing market.
These were some highlights of the annual State of the Nation’s Housing report, which Harvard University’s Joint Center for Housing Studies released on Tuesday. It documents a recent downturn in household formation, a term for the process of young, single people or couples moving into their own homes, as well as a decline in people moving from one city to another to find housing or work. These factors, the report said, combined with a sharp drop in immigration, could spell diminishing demand for new housing in the near future.
Chris Herbert, the center’s managing director, acknowledged during the first of two panel discussions held on the report Tuesday in Boston that it paints a “dark” picture of the current market, one in which a lack of sufficient housing supply is affecting demand.
“What concerns me the most is how national the problem is. You convince yourself it’s a coastal problem, but the data says different,” Clark Ziegler, executive director of the nonprofit Massachusetts Housing Partnership, said during the discussion. The nonprofit aims to increase housing production in the state.
Household growth dropped for the past two years and is on pace to fall again in 2025, after gradually expanding for over a decade. With high mortgage rates and sale prices, many people saw renting over the past few years as a more affordable option amid a boom in apartment construction. But the boom is ending as the economy cools, and with less new development in the pipeline, the report said, rents are likely to rise, too.
One statistic cited in the report is the gap between what people earn and what it takes to buy a home. The median single-family home in the U.S. in 2024 was $412,500, five times the median household income. Historically, the report said, a price-to-income ratio of three would be considered affordable.
“It takes a $126,000 income to afford a house, and people can’t get into homeownership, so what are they doing? They’re renting," Herbert told his fellow panelists. "We need more housing, but the market has not been conducive to that."
US homeownership rate drops for first time in eight years
That $126,000 figure reflects the monthly mortgage payment on a median-priced home, which the report said was $2,570 in 2024. That assumes typical costs on a 30-year, fixed-rate loan for a first-time homebuyer, including a 3.5% down payment and 3% closing costs. The monthly payment is about 40% higher than in 1990, after accounting for inflation.
In more than half of all U.S. metropolitan areas, a buyer would have to earn at least $100,000 to afford the median-priced home, according to the report.
Many buyers are also blocked by how much down payment they must come up with out of pocket. In 2024, a buyer needed $26,800 in cash to pay the closing costs and down payment on the median-priced home, the report said, noting that a quarter of first-time buyers now use gifts or loans from family or friends to cover these costs.
That’s not an option for a lot of young buyers.
“A lot of people go to the bank of Mom and Dad, but a lot of Black and brown people don’t have a bank [like that],” said Herbert.
In this challenging environment, the U.S. homeownership rate dropped for the first time in eight years, by 0.3% to 65.6%, with the biggest decline among buyers younger than 35. Gaps in homeownership rates by race experienced no improvement last year, with the rate for whites at 74%, compared to 47% among Black households and 49% for Hispanics. Both groups had narrowed the gap with white households between 2019 and 2023.
Builders have responded to the affordability challenge somewhat by shifting to smaller homes and fewer amenities. The median size of a new home fell to 2,150 square feet in 2024, the third straight year of declines. Builders have also been offering mortgage rate buydowns to make it easier for customers, but persistently high rates and construction costs could overshadow those efforts, the report said.
The challenge moves beyond the down payment and mortgage
Daunting barriers exist for homeowners, especially in some parts of the country. Taxes and insurance can add hundreds of dollars to the monthly housing bill for lower-income families already struggling to pay their mortgage, said Daniel McCue, senior research associate at the center and principal author of the report.
Property taxes and the cost of homeowner insurance have risen dramatically in Miami, for example. For the median-priced home purchased there in the first quarter of this year, the insurance payment is now $920 per month, the report said.
Older homeowners face their own issues. Many want to age in place but can’t afford to customize their residence to meet their needs, Samantha Porter, senior adviser of community engagement at the Federal Reserve Bank of Philadelphia, said during Tuesday’s second panel discussion. Those same homeowners are renting out rooms so they can stay in place, or they are moving in with roommates.
“Many people are now starting to look for alternatives to address being alone in a large property that is hard to dispose of or they can’t afford to dispose of,” Porter said.
Demand, immigration and mobility slow
Although household growth shot up between 2019 and 2022 due to the COVID-19 pandemic, the metric has inched back down on an annual basis the past few years. The report suggests that narrowing growth will continue. In 2024, the United States gained 1.56 million households, a drop from 1.61 million in 2023 and the 1.93 million annual average during the previous four years.
Growth slowed again in the first quarter this year, with the country on pace to reach 1.26 million in 2025.
Part of that expectation for slower growth stems from cooling demand for housing: More people thinking about forming households are facing economic uncertainty; immigration — the largest source of U.S. population growth — nose-dived in 2025; and, according to the report, residential mobility is at a “record low.”
Following three years of rising immigration that brought the U.S. roughly 2.3 million people each year from 2022 to 2024 — much more than the roughly 830,000 annually the decade before — the number of people moving to the U.S. plunged in 2025. This means slower population growth and fewer people looking for a home.
Although immigration affects urban and rural areas alike, the Harvard report indicated it was “the sole driver of growth in nearly a quarter of counties outside metro areas, most of which are rural.” And with the U.S. Census Bureau forecasting that deaths will outpace births by 2038, the “only growth in population would come from immigration.”
Securing that growth might be tricky for the United States should its current immigration downturn continue. And, based on plummeting “border encounters of unauthorized migrants” so far in 2025, the report found that “outsized gains in population from immigration appear unlikely to continue.”
Just as rising immigration numbers played a part in increasing household growth in recent years — the U.S. Census said immigrants made up 55% of the annual population growth in 2023 — shrinking numbers will likely mean fewer new U.S. households.
When it comes to household mobility, or the number of households that relocate, the Harvard report also found a decrease.
While renter mobility grew in 2024, households reported a record-low mobility rate of 3.1% in 2024, or 24% fewer homeowner relocations than the center measured the previous year. Part of that stemmed from a softening of migration between states, particularly in the South, kneecapping “the largest source of population growth in 2024,” the report stated. Some states, including California and New York, didn’t lose quite as many net residents in 2024 as they have in years past. The trend goes hand in hand with fewer residents fleeing dense cities to become homeowners in the burbs, with net moves into suburban counties falling 16%.
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The housing crisis has the public’s attention, Jarrod Elwell, community development regional manager at the Federal Reserve Bank of Richmond, said during the second panel discussion. That creates some hope for substantive policy changes.
“When we landed in a community 10 or 12 years ago, particularly urban communities, and asked the city to list the top five priorities, they would have said jobs, workforce, infrastructure, finances, and schools,” he said. “We can’t land in an urban community now and have housing be lower than number two. What we’re seeing today is permeating not just suburban but rural communities."
The federal government has a role to play in making homeownership easier, other than finding ways to reduce mortgage rates, according to Harvard’s report. As an example of a program helpful to first-time buyers, the authors cited rate-buydown products Federal Home Loan Banks in Des Moines, Iowa and Boston offer that cut rates by about two percentage points.
The report also pointed to changes several states and cities have implemented in the past year to make it easier for builders to construct multifamily buildings in areas previously limited to single-family homes. Accessory dwelling units, secondary spaces often located behind the primary house on a property, are also finding support in more localities as a new housing source.
Some states are also encouraging modular housing construction. The report cites an estimate by the University of California, Berkeley’s Terner Center that factory-built homes could reduce construction time by up to 50%. The challenges to this approach include the upfront investment required in factories and building codes that may discourage housing that isn’t built on-site.
Private builders are making changes, too, not only by building smaller single-family homes, but also by ramping up the construction of more affordable townhouses. The report notes that builders started 176,000 of these attached homes in 2024, 59% more than five years earlier.
Harvard’s report cautions that the Trump administration’s tariffs on goods used to build homes may cause further strain for would-be buyers, citing a National Association of Home Builders survey in April that estimated tariffs would add $10,900 to home prices.
To really unclog the housing market, Ziegler said, zoning and building codes and “community expectations” about what types of development are acceptable in neighborhoods need to change. He said the building industry, which “has been doing things the same way for decades,” also needs further reform.
“We’re nowhere close to where we need to be,” Ziegler said.