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Just a quick note this week, since I am traveling, tied up with some consulting projects, and working on a deep dive into housing demand for a forthcoming guest contribution to my friend Brad Hargreaves’s excellent publication, Thesis Driven. In fact, it was in the process of researching that piece, and the coincidence with the publication on this topic by The Economist Magazine¹, that the significance of what I’m writing about this week really hit home.

Population growth will slow to a crawl

In the decade to 2020, the population grew by around 7.4%—the weakest decade of growth since the Great Depression. The population is expected to settle at a growth rate of only 1 million per year by the end of this decade. For context, the average population growth rate in the 1990s was over 3 million people per year.

Still, this is just a taste of what’s to come. By the 2050s, the Census Bureau forecasts the population inching higher by a mere 350k per year—not far off where it fell to during the depths of the pandemic.

It’s an odd situation, because the short term trend is totally different: an explosion in the population driven by migration. The official Census Bureau figure puts in-migration at around 1 million in 2023. But Goldman Sachs, for example, estimates it was far higher—at 2.5 million. The Congressional Budget Office (CBO) also believes immigration may have surged to record levels of 2-3 million per year in 2022-2023. They attribute much of this to “unauthorized migration”. If they’re right, then 2023 was the biggest population boom in the country’s history. Regardless of the exact figure, the surge of immigration is having widespread effects—some positive (the surge of workers is helping the economy to growth rapidly without inflation), and some less so (potentially exacerbating inadequate housing supply).

But this is a short term blip. Over the long run, the population is set to grow more slowly. This is because the fertility rate is plunging. On average, each woman needs to have 2.1 children to keep the population steady (it’s slightly higher than 2.0, to account for child mortality and other factors). But fertility fell below that level about 15 years ago, and we never looked back. In 2020, the ratio fell to 1.64, the lowest rate recorded since the government began tracking these statistics in the 1930s. In fact, if it weren’t for immigration, the American population would begin to shrink in 2038.

The slowdown in population growth—alongside the aging of the population—will have enormous consequences for the housing market. It could potentially alleviate some of the supply shortage that’s driving prices out of reach. But be careful what you wish for: a slowing national population growth means that some regions will experience an outright shrinking of their population, and this could have some painful economic effects. For example, some towns may fall into ‘doom loops’—wherein the population shrinks, depriving the state of tax revenues, leading to a decline in services, and a further outflow (I spoke to Arpit Gupta about this in the context of New York City earlier this year, here).

I’ll discuss the demographic impact of a shrinking and aging population on the housing market in depth—for paying subscribers—in a couple of weeks. See you on Saturday with The Week in Review.