What’s the impact on rent?
Decline from Post-Covid Peak
- Total Units: 20.7 percent
- Single-Family: 25.2 percent
- Multi-Family: 27.3 percent
The decline puts the number of single-family units under construction near the middle of a very wide range of 236,000 on the low end and 990,000 on the high end.
However, the number of multi-family units under construction is still enormous historically speaking.
Impact on Rent
For three years, the consensus opinion (not mine) was that rent prices would collapse.
That didn’t happen although the rate of increase in the price of rent has slowed dramatically.
However, Trump sealing off the Southern border from immigration, could soon start having a positive impact (lower rents) if builders started too much immigration-based construction.
Under Construction vs Completions
A crash in the number of completions is also underway. Once again the decline is led by multi-family.
As completions drop, so does the necessity to lower rent prices dramatically.
Once again, the impact on rent will be whether or not builders overbuilt.
Basic Demographics
From AI: Approximately 4 million people in the United States turn 25 each year. This is based on the population figures for the 20-24 and 25-29 age groups, which each contain roughly 11 million people. Since these groups are relatively stable, and people age into them at a rate of about one year per year, around 1/2.5 of the total population in these age ranges turns 25 annually.
Demand Factors
- Based on demographics, there’s a potential demand for an
- 4 million units annually even if immigration remains zero.
- Apartment sharing
- Moving back home or living with parents
- Death rates of boomers
- Recession
Annualized completions are 1.4 million which is also the number of units under construction.
Is that enough?
In recessions, people will move back home or take on roommates.
Factor it all in and it’s not clear if housing is overbuilt although some locations such as Austin were.
And if completions are insufficient, then rent prices will head back up.
Housing Permits Sink to the Lowest Level Since June 2020
Earlier today I noted Housing Permits Sink to the Lowest Level Since June 2020
Here’s the key point: Homebuilders can’t start what isn’t permitted.
Buyer Traffic Very Low
Yesterday, I commented Wells Fargo Housing Market Index Remains Weak, Buyer Traffic Very Low
The use of sales incentives was 66% in August, up from 62% in July and the highest percentage in the post-Covid period.
This is a very complex setup so I have no assumptions about rent.
Many people are trapped in their homes unwilling to move because of mortgage rates. Millions of others want to buy a home but cannot because of affordability issues.
Immigration demand is now close to zero and job growth is anemic.
Also see How Much Overstated Are BLS Measures of Rent and Shelter? Or Are They?
Addendum Q&A
Rural America covers a vast majority of the land area, but has only 17.2 % of the population. Roughly 279 million people in urban areas and 56 million in rural. (2023)
Some counties are so small that losing half the population would change little.
Danville, Illinois, is considered a small urban area, pop 28,000. It had 46,000 in the late 1960s when I grew up.
The county went from 91K to 71K. Nearly the whole loss was in the city itself.
Im sure Blackrock helps to keep rents up regardless.
The spread of $1.0 million household net worth: 12% silent gen, 51% boomers,
gen X: 30%, millennials: 8%, zoomers: under 1%. $1M net worth in: the primary resident, vacation homes, stocks, bonds, mutual funds, retirement acc, businesses, farms…but there are 20 million vacant household units, CRE is down and the stock markets are peaking. For two decades the gov took it to the chin for millennials, zoomers and alpha. The gov have one enough for gen X and the boomers.
Most hurricanes spin counterclockwise. The spin means nothing. Bermuda high is
a semi permanent high pressure. It’s a stirring wheel. When Bermuda high shifts towards Africa, hurricanes rollover the east coast, stirring around the high. When Bermuda high shifts west, towards Fl, hurricanes can roll over Cuba and rise along FL west coast, towards Fl panhandle, to the Gulf of America: Alabama, Louisiana, or even Houston, when Bermuda high shifts further high and west.
A slow down in new builds means that construction workers (framers, Cement Men, Plumbers, HVAC, etc.) will see job shortages in those regions. JUST IN TIME to NOT miss the immigrant Labor population which, if you know any builders, make up a big percentage of on-the-ground Construction Crews. HARD WORKERS, those Mexicans.
The vacancy rates: 2010: 14.25%, 2025: 13.8%
Places you really do not want a home are Florida and Texas. Those markets have fallen off of a cliff. Florida is reeling from insurance and tax increases and Texas overbuilt and people realize that it is incredibly hot in summer and the bugs will drive you crazy!
Some condos in Florida are unsellable and people are sending the keys to the bank or just squatting while awaiting eviction.
Hurricane Erin is a good example of why I sold all of my Florida real estate. Imaging that thing having a track only 100 miles west of where it is? The devastation would be horrendous. Sadly it is not IF it is going to happen, it is WHEN?
1920’s boom/ bust in repetitions.
True enough, but with the hurricane risk, insurance costs and the tax structure having the ability to destroy affordability, it is financially dangerous to live on the coast from Texas to Cape Cod. Perhaps even north of there?
I am sooooooo happy to have left!
Boom and bust is one thing but once you have been in a cat four hurricane and survived, the last thing you want to do is live with that risk.
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In 2006 there were 126 million housing units occupied and vacant. Occupied : 112 million. Vacant: 14.4 million. Household size: 2.6. Family size: 3.14.
In 2025 there are est 145 million housing units, occupied and vacant. Only 125 million are occupied. 20 million: vacant. In 2011 there were almost 19 million vacant housing units out of 132 million total. In 2025 the RE market is as bad as in 2011, almost.
Total under construction doesn’t mean that they will be completed. Completed peaked in 1973 at 2,300K units. In 1973 there were more single family completions than multi units. Since their peak in 1973 at 985K it’s all the way down. Between1992 and 2010 the multi completions were in recession. Since 2010 it’s rising to 723K, a lower high. In 1973 the US population was 211 million. Today: 350 million. In 2025 there are about 125 million units, 80 million are detached single family houses. Some are vacant. In 1973 household size was: 3.0 family size: 3.6. Today household size: 2.5, family size: 3.1 // 350 million/3.1 ==> 113 million housing units.
Approximately 2 million people get married each year.
Sales crashed so why wouldn’t construction follow.
Looks like a normal up and down to me.
Inventories of completed homes are at record levels. It only makes sense to slow down on building more. Particularly in Florida and Texas. Their real estate markets are falling off of a cliff!
With as many illegals who are either being self-deported or being arrested & sent packing, I’d say builders are quickly figuring out that the big boom is coming to an end. Now, we just need home prices to tank.
Moreover, we are literally re-visiting history circa H2 2007. The GR was called by NBER in December 2007. While it may take a bit longer for the next recession to arrive than Dec 2025, it certainly feels close just like it did 18 years ago.
Wallstreet insiders are selling like nobody’s business. Buckle up!
True enough about the loss of laborers. Many work sites have slowed progress and the pay scale is going to have to rise to attract workers. This will again, raise costs.
Materials vary in cost right now as the slowdown helps contain some costs. Lower inventories of new homes should be supportive of prices, but I doubt that the economy will withstand the tariffs.
What is needed is low income housing as the economy slows. It is low margin and difficult to manage so attracting investment is difficult.
In the bigger picture, the militarization of our major cities gives me the creeps. It is reasonable to think that Trump is anticipating serious unrest. Placing military assets in strategic locations is a hallmark of impending trouble IMO.
I unloaded a bunch of stock on Monday and more today given the frothiness of this market and the unrealistic expectations that things will get better.
As an aside – The port of LA has had a surge in activity this month and that indicates that inventories are being built in spite of the tariffs. Food for thought…
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Divorce during recessions drives up demand for rentals as households split.
But then more houses go on the market, making the for-sale units cheaper. It’s all one balloon that gets squeezed on one end or the other.
Nice analogy.
So many markets are (close to) frozen solid as this standoff between buyers and sellers continues (sellers will lose). Seriously, how are Real Estate professionals putting food on the table these days, or, how are they not being forced to sell themselves?
I would think the number of baby boomers who will be leaving a house due to death or disability will be millions over the next ten years. I’m only 62 and already rethinking the whole home ownership experience given rising taxes, maintenance and utilities. What does the data suggest to you?
Well the good thing is you started thinking the bad news is there are no easy solutions. The fed seems to be settling on 3% inflation as the new normal so take all of your expenses for this year and add 3% every year over the next 10 years then try to figure out when you go broke.
https://www.cnbc.com/2025/08/19/senior-living-housing-market-cant-keep-up-with-demand.html
More than 4 million boomers will hit 80 in the next five years, and occupancy at both active adult and assisted living communities is already rising fast.Ventas, a senior living real estate investment trust with a $31 billion market cap, is betting big on what CEO Deb Cafaro calls the longevity economy. There will be just about 4,000 new senior living units developed this year and next year, but demand growth would necessitate 100,000 new beds each year through 2040, according to data from the National Investment Center for Seniors Housing and Care.Some of us already did the calculations and we’d rather live like kings than peasants and will be moving on to greener pastures.
Many of the sibling heirs will not want to be in business with each other, so they will cash out immediately. This will create a steady supply of listings for the next decade/15 years (assuming no more sudden spikes in immigration aka democrat leadership). Even those who choose to rent out their parents’ (very inefficiently utilized) home will be adding inventory onto the rental market which, contrary to popular belief, DOES have an impact on for-sale prices as well (we’re seeing this effect right now). Also, if they choose simply to move in, that will ALSO leave the unit they abandon as fresh inventory. So, any way you slice it, inheritance or no, there will be a glut of structures in the near future…IF there is not another spike in immigration.
Renting out large houses may not be feasible in the future. Zoomers and MIllenials don’t have nor want many kids. Property taxes, insurance and maintenance on larger homes will necessitate huge upkeep expenditures.
So those 4 and 5 bedrooms homes that have huge cooling/heating, property tax and insurance bills are not really desirable homes. The only way to rent them is to large families or groups both of which fall into the immigrant category. It’s more likely they get torn down and land is used to build condos or more efficient housing.
People are creative. The homes will either be split up (very easy to do with California’s ADU/JADU laws) or the houses will have no choice but to sell for so little that the new occupants can either seal off, or even demo, the parts they don’t need. But full demolition is the extreme case that I don’t think we’ll see very much of. The politicians will open the border completely (again) before it comes to that.
I have to question the lager homes view, because of my experience with this particular topic. I understand a plumbing issue for occupant numbers is possible, and that would deter that for sure, but I see and hear it being asked for. The kids are in college longer now, and love the safety, security, and companionship it brings. Not to mention cost, and going out is not as necessary for sure. They are used to it, and many love it. Not a problem right now to find occupants if your anywhere in/near colleges I would guess. I suppose it’s area dependent in some ways, but colleges are supported by these type of places for the most part.
I would think there will be strong demand for homes that can convert a part of them into an inlaw suite.
That way it’s easier to look after aging parents and in return they give you free day care.
Baby Boomers departing in life or from their home for various reasons, is inevitable for millions I do agree. This supply will be in rentals, and ownership, and probably about equally, from what I have seen so far myself.
I am equally rethinking the home ownership experience given rising taxes, as mine went up nearly 50%. Maintenance, unless you’re licensed (Ins.) or really handy, is Over the Top! My utilities are also rising steadily (environmental?) over the past few years. This suggest to me that we are either at the tail end of the disaster we have been in for a few years now, or still stuck in it for right now. I am watching closely, but have quite a few years left before the next tax adjustment takes place.
I am hoping we start climbing out of it based upon the most recent numbers and activity I have read about. The court BS seems to be subsiding or weeded out faster, and with penalties now too. This crap will subside much quicker now I am guessing.
With the Tariff situation looking more positive for jobs, and inflation finally subsiding, we could see a slight resurgence in job activity, and spending down the road a bit, if it continues. Before the mid-terms we will see a boost for sure, and perhaps even some damage will be averted with some of the new underhanded activity being uncovered so to speak, or are at least emerging in a few areas now…
I see better now than 3 months ago, brighter now than 1 month ago, and the possibility of some really, really Positive actions occurring. Things like No Tax on S/S, And Tips! That will be huge!! I am very excited about “The New Money” heading our way right now, for investments in all sorts of new activities!! 3-4 Months from now, might look like, I dare say, New People are Finally In Charge!!!
Your landlord whether a person or a company is subject to the same taxes, maintenance costs and utilities and will roll them into your rent plus a markup. If the market totally collapses you can get a great deal……for a while until the market picks up and then it is off to the rent races again. When you get older you want to have predictable costs and renting is very unpredictable when it comes to costs and duration. Of course I am assuming you own your house free and clear as you should at your age. If that is not the case then you are pretty much screwed.
You make a good point. Yes I actually own two houses with no mortgage and even if I sell and rent the rest of my life, I won’t be able to spend all the equity. I’m just conditioned to want to own my own house, even if it costs more than renting. I don’t think young people have the same attitude.
Young people do want to own their own house but since so many can’t afford one these days they rationalize it as not worth it. I have talked to more than a few about it. The problem for them is just getting the foot in the door. All their friends who have bought a home or apartment had parents who could give them a few hundred thousand for the down payment. Those who don’t have that luck rent. Granted those I have talked to live in either the Paris or NYC area.
I have been waiting to renovate/modify an outbuilding on my farm, I have great relationships with a number of contractors and have let them know that this project could wait until they slowed down.
Three contractors have recently contacted me and I have started the process of materials details and bidding.
Times have definitely changed in the building world!
Next comes the sticker shock!
Good Luck!
Had a guy doing some tuck pointing for me today. He’s busy with big commercial projects but says residential customers have put things on hold. Minneapolis
There is another angle to consider, that low vacancy/high rents have been a headwind to household formation.
If rents tick down, it will likely be concurrent with incomes ticking up. And, so on the margin, as we get more housing available, it’s possible that we will see de-densification in housing occupancy (roommates splitting up and living alone, adult kids moving out of mom/dad’s place, etc.).
The thing to watch for (IMHO) is jobs. If jobs stay steady, any rent reductions will be muted.
Where do we get reliable jobs data now that the Cheeto Pedo has put his flunky in charge of the govt. numbers?
Same place where you got reliable jobs data before last week. It sure wasn’t from the monthly Payrolls report.
Hint: ADP isn’t everything, but it isn’t wrong. And many people monitor tax withholding data.
I’m sure that between ADP and the other servicers, they could come up with much better extrapolated numbers than the government and their surveys ever could.
Whether private or government, all the published results are based on very incomplete data, which only becomes slightly more complete over time. Expecting any source to be accurate is just foolish.
Even those who make a living trading on this data realize that it is incomplete and inaccurate. Yet it is the only data they have to work with and they have no choice but to play the game. Which is why markets move quickly on data that often turns out to be wrong.
Now, add in a president who makes numerous off-the-cuff remarks and big exaggerations, which traders also have no choice but to react to. Only to be whipsawed by the next statement.
Such as when Trump said he would put 50% tariffs on copper, causing the price to skyrocket. Then when he came out with details later, and it was only on “some”’copper products, the prices crashed back down.
We live in an era of great volatility. One needs to be nimble in order to profit from it. Which is one way to get into that top 20% you talked about.
You really need to be in the top 10% to even afford healthcare.
Nice recession indicator – housing construction has never fallen this far before without there being an imminent recession.
I can name 17 different things in the last three/four years that have never happened “outside of recession” or “without triggering a recession” and yet here we are sailing so smoothly down the peaceful river of prosperity. The traditional economy is DEAD. What we knew to be a cyclical recession is DEAD. The bottom 80% struggle more and more each day but due to the Cantillon effect and the money printer (same thing), the top 20% do so well that the numbers all average out nicely and no “recession” ever appears…in the data anyway. Which also means the politicians can simply call the bottom 80% delusional and wipe their butts with their concerns and complaints.
The solution is to work hard and smart enough to be in the top 20%. Many in the bottom 80% don’t realize this and rely on who they voted for to make their lives better.
I grew up in the rust belt. My Dad told me the steelworkers showed up at the shuttered steel plants the day after FDR was elected. Of course, they remained shuttered.
Intriguing and ironic isn’t it? Smart people already know where this will lead….
Got exit strategy?