US Housing Surplus Possible by 2035, MBA Report Warns

The United States may face a surplus of housing units by 2035, according to a new analysis by the Mortgage Bankers Association (MBA). The report, titled "Implications of a Persistent Slowing in Housing Demand," estimates that the nation could add between 10.6 million and 14.6 million net housing units over the next decade. This potential oversupply is projected to occur as household growth slows, influenced by an aging population, lower fertility rates, and declining immigration projections. This forecast marks a significant shift from the past two decades, which were characterized by a structural housing deficit. Since the Great Recession, new construction has consistently lagged behind household formation, resulting in an estimated shortage of 4.03 million homes.

The MBA report argues that the demand conditions that contributed to the previous shortage are now reversing. In markets that experienced aggressive building during the COVID-19 pandemic boom, particularly in the South and West, new homes and apartments may continue to come online while the number of households able or willing to purchase them declines. The report questions whether the narrative of a supply shortage will remain relevant for the coming decade, given these shifting demand dynamics. The MBA's analysis is based on projections of both future housing needs and the potential delivery capacity of builders.

However, Joel Berner, senior economist at Realtor.com®, cautions that housing demand is not static. He points out that builders can adjust production levels in response to slowing sales, and household formation can increase if housing becomes more affordable. Furthermore, a home built in a rapidly growing Sun Belt market does not alleviate housing scarcity in high-cost metropolitan areas located hundreds of miles away. The "arithmetic" of housing supply is therefore complex, involving not just the total number of units but also their geographic distribution and affordability relative to local demand.