It’s a common refrain that the U.S. has a severe housing shortage. But according to Ivy Zelman, executive vice president and co-founder of Zelman, a Walker & Dunlop company, the housing market is “more balanced” than it appears.

Zelman said the two main drivers of housing demand — population growth and household formation — have been slowing, suggesting that the U.S. may need fewer new homes than the 4.7 million that sources have estimated.

“Household and population growth are not 100% correlated, but they move directionally together, and we've been seeing a downward trajectory for both population and household growth for decades,” Zelman said on this week’s Walker Webcast, hosted by Walker & Dunlop CEO Willy Walker.  

Zelman added that the U.S. is at a pivotal demographic point in history as it approaches 2030, driven by three key factors: declining birth rates, stagnant immigration and an increased number of deaths as the population ages. 

Birth rates are expected to fall below replacement levels as young women opt to have children later — or not at all. Immigration levels have largely come to a standstill, as it’s estimated that net migration was “likely close to zero or negative” for 2025. And while Americans are living longer, as life expectancy has reached an all-time high, death rates are still rising, Zelman said. 

“Together, these trends could further reduce the population as well as the number of new households,” she said.

Another major factor that could potentially further reduce household formation is young adults under 35 and their desire not to leave home. 

About one-third of all young adults in the U.S. still live at home. This is a contrast even from the first part of the decade, she said, as there was not only a desire for distance and space but also a lot of stimulus dollars and low interest rates. 

But since 2022, economic uncertainty has crept into the market, with interest rates and inflation rising. As a result, the 7% household formation number, which is in line with historical averages, has ticked up to 11%, per Zelman’s research. 

She jokingly referred to this demographic as having a bad case of “affluenza” — or when people get too comfortable to form households of their own.

“More families want to create households that are very comfortable for their adult children,” she said. “Nobody's really pushing either. I think that parents are more accommodating for kids living at home longer, and it might be that they finally leave when they get married later in life.”

Walker asked Zelman about the great wealth transfer that is expected to happen in the next 20 years — expected to total about $110T. He argued that this massive shift could partially offset the overall demographic slowdown. 

Even if fewer new households are forming, he said, more parents and grandparents are helping younger buyers with down payments and cash home purchases, giving them more purchasing power. 

“What we see today is an increase in cash purchases, roughly around 30% right now,” Zelman said. “We're in the mid-to-low 20% range historically, so I do think cash sales are indicative of support. Roughly 20% of the loans for the first-time buyer are actually getting down payment assistance as well, and I think that that's been an increasing number.”

Zelman added to the notion that housing is facing more of an uncertainty crisis, saying that owners are “stuck” in homes with low mortgage rates. That lock-in effect is weakening as more homeowners move into homes with higher mortgage rates, but it will take years to disappear.

“Look at where we were in 2022: 88% of homeowners that had a mortgage were locked in below five, and 50% were locked in below three and a half,” she said. “Fast-forward to May of 2026: We're now at 68% below five and 39% below three and a half. By the end of 2027, we'll be at 59% below five and 33% below three and a half. The ‘stuck’ factor diminishes people's willingness to give up that low rate.”

But life changes, she said, and the three Ds — death, divorce and default — will continue to drive transactions. No matter what the economy is doing, there will always be these driving factors. The fourth D is discretionary buying, and the fact that people are stuck mitigates discretionary selling, she said.

“People always say to me, ‘What's the magic rate that's going to make the market healthier?’” Zelman said. “It's more about a rate of change, and as rates were headed lower, people were getting more comfortable with the idea. We incrementally started to see improvement that is now sequentially and unfortunately decelerated.”

On the multifamily side of the market, national vacancy has reached 8.3%, Zelman said. This market, as well as the built-to-rent segment, is oversupplied, but new construction is slowing. This hints that absorption is inevitable, which will help make the market a little healthier. But compared to single-family housing, multifamily is still the better asset class today.

“We’re seeing incremental accelerating renter households, while owner households are decelerating because the affordability is clearly much more compelling to be a renter than an owner,” Zelman said. “If you're comparing an apartment to a starter home, it's about a $900 all-in differential between monthly payments. It's looking more promising, from our perspective, to be in the multifamily sector, if I'm making bets.”

Of course, some regional markets are performing better than others, she said. Boom markets of the past few years, like Austin and Nashville, are seeing pretty steep rent declines, while markets like South Carolina, Columbus, Ohio, and Boise, Idaho, are on the upswing.

“I think [the Carolinas] are better positioned than places like Austin, because South Carolina was the No. 1 state for population growth through the most recent data,” she said. “You're still seeing better migration and overall growth in those markets.”

This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content. 

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