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Falling US birth rates are fundamentally reshaping housing demand, driving a significant market shift toward smaller, more affordable homes and creating longer-term implications for homebuilders, buyers, and renters. Despite a population increase of over 100 million since the 1980s, the number of annual births has returned to 1983 levels. This demographic trend, coupled with high homeownership costs, is accelerating demand for compact, efficiently designed properties and extending the average renting period.
According to data from the Centers for Disease Control and Prevention (CDC), there were 3.6 million births in 2024, matching the total from 1983. The key metric, the fertility rate, has dropped to 1.6 babies per woman. A fertility rate refers to the average number of children a woman is expected to have in her lifetime. This decline places the United States on par with many European nations and signals a lasting demographic shift. The immediate effect, as noted by John Burns Research and Consulting, is lower demand for multi-bedroom homes intended for large families, with longer-term impacts including slower growth in the number of potential renters and homebuyers.
The profile of the typical homebuyer is evolving. Data indicates that by 2034, empty nesters and retirees will comprise over 14 million homebuyers, while the segment of entry-level buyers aged 30-44 will number only about 3 million. Furthermore, a record 73% of recent buyers did not have a child under 18 living at home. “Buyers with children are at an all-time low. So, they may not need that three-bedroom, two-bath home. They may really want a two-bedroom, one-bath home,” explains Jessica Lautz, Deputy Chief Economist at the National Association of Realtors®. This change in household composition directly influences the size and type of property in demand.
Skyrocketing costs of homeownership are a primary driver. With the national median list price at $440,950, high insurance costs, and elevated mortgage rates, affordability is a significant constraint. Buyers are responding by seeking smaller, often older, housing stock that aligns with both their budgets and smaller-family lifestyles. While the median square footage for a newly constructed home in Q2 2025 was 2,044, the median for an existing home was a more modest 1,794 square feet. A poll by the National Association of Realtors® confirms this trend, finding that the ideal home size for buyers has decreased from 2,260 square feet two decades ago to 2,076 square feet today.
The trend of delayed homeownership is boosting the rental market. The typical first-time homebuyer is now 38, up from an average of 31 in previous decades. Consequently, 72% of renters are now aged 30 or older—an all-time high. “Renting is an increasingly favorable option, especially as buying a home remains prohibitively expensive. It is more affordable to rent than to buy in the vast majority of large U.S. metros,” says Hannah Jones, a senior economic research analyst. For new construction, builders are adapting. After years of focusing on larger, more profitable homes, many are now pivoting to meet demand for smaller, more affordable units. The size of newly constructed homes has fallen by an average of 10 square feet per year over the last five years.
For today's market participants, the key takeaways are clear:
The US housing market is adapting to a new demographic reality, making smaller, more centrally located homes the assets with the strongest demand fundamentals.
