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The years ahead may be marked by slower sales, for a number of reasons

By Mark Huffman of ConsumerAffairs

• Household growth has slowed sharply as economic uncertainty, weak labor markets, and reduced immigration dampen housing demand.

• Housing affordability continues to worsen, with nearly half of renters burdened by housing costs and homeowners facing steep increases in taxes and insurance.

• Researchers say federal housing assistance remains far short of need, while states and local governments struggle to fill the gap.

For more than a decade, the housing market has been marked by a housing shortage that has increased home prices and created affordability challenges for buyers. But a new report from the Harvard Joint Center for Housing Studies suggests a shift may be occurring that helps neither buyers nor sellers.

Persistent affordability challenges, economic uncertainty, and weakening demographic trends are putting increasing pressure on the U.S. housing market, the report found.

The center's annual State of the Nation's Housing 2026 report paints a picture of a housing sector facing multiple headwinds, including slower household formation, declining mobility, softening construction activity, and growing financial strain on both renters and homeowners.

Household growth has slowed

Household growth, one of the key drivers of housing demand, slowed for the third consecutive year in 2025, falling to 1.1 million households from an average of two million annually in 2021.

Researchers say many younger Americans are delaying the transition to independent living because of financial pressures.

"Many young adults simply cannot afford to form their own households and are instead doubling up or living with family," said Daniel McCue, senior research associate at the Joint Center for Housing Studies. "For others, deep uncertainty about their financial futures and about the broader economy are causing them to delay major life decisions."

The report also found Americans are moving less frequently than ever. The residential mobility rate fell to a record low 11.2% in 2024, largely because homeowners remain reluctant to give up low mortgage rates secured in recent years. Interstate migration has slowed as well, reducing population growth in traditionally fast-growing states such as Texas and Florida.

At the same time, sharply reduced immigration is expected to further weaken housing demand. Net international migration was cut in half during 2025 and is projected to decline another 75% in 2026.

Construction slows, while affordable housing remains scarce

Housing construction softened in 2025 as high borrowing costs and elevated home prices weighed on demand.

Single-family housing starts fell 7% as builders faced growing inventories of unsold homes and responded by cutting prices, subsidizing mortgage rates, and offering smaller, less expensive homes. Multifamily construction remained above historical norms but continued to decline from recent highs.

Despite rising vacancy rates in some markets, researchers say the nation's affordable housing shortage remains severe. According to the report, 11 million extremely low-income renter households are competing for just 3.8 million affordable and available rental units.

"The existing stock of low-rent housing is shrinking rapidly, and private markets are incapable of producing enough deeply affordable units," said Alexander Hermann, senior research associate at the center.

The number of rental units with inflation-adjusted rents below $1,000 per month declined by more than seven million between 2014 and 2024, the report found.

Housing costs continue to climb

Housing affordability remains a challenge even as rent growth has cooled in many metropolitan areas.

The report found that 22.7 million renter households, or 49% of all renters, spent more than 30% of their income on housing in 2024. More than 12 million renters devoted over half their income to housing costs, a level considered a severe cost burden.

Homeowners are also facing mounting expenses. While mortgage rates remain elevated, researchers note that non-mortgage housing costs have surged. Property taxes increased 31% between 2019 and 2025, while average monthly homeowners insurance premiums jumped 72%, driven in part by increasingly costly weather-related disasters.

Meanwhile, homeownership remains out of reach for many households. National home prices have risen 54% since 2020, and the median existing single-family home now sells for nearly five times the median household income.

Existing home sales remain stuck at roughly 4.1 million annually, the lowest level in three decades, and the national homeownership rate has declined for two consecutive years.

Federal support falls short

The report concludes that federal housing assistance programs remain inadequate relative to growing need.

Although recent changes to the Low-Income Housing Tax Credit are expected to help finance additional affordable housing units, researchers say funding for housing vouchers and public housing programs continue to lag demand.

As a result, states and local governments are increasingly pursuing their own housing initiatives, including zoning reforms, housing trust funds, state tax credits, and experimental social housing programs.

"Across the country, we see governors, mayors, and local leaders stepping up with creative solutions to expand supply and support vulnerable households," said Chris Herbert, managing director of the Joint Center for Housing Studies.

But Herbert warned that local efforts alone are unlikely to solve the problem.

"Only the federal government has the scale and staying power necessary to close the gap between what our housing system produces and what our lowest-income households can afford," he said.