Demographics may seem like a slow-moving force, but they carve powerful landscapes over time, just like glaciers,” says Eric Finnigan, Vice President of Demographics Research at John Burns Research & Consulting.

For strategic decision-makers in homebuilding and residential development, the outlook for 2025 and beyond presents both challenges and opportunities. The market faces persistent undersupply, declining birth rates, and shifting migration patterns, along with labor shortages and affordability concerns. However, new opportunities have emerged due to surging immigration, the work-from-home trend, and a massive wealth transfer between generations.

Builders who adapt to these demographic realities will be better positioned to weather today's conditions of turbulence, uncertainty, and volatility, and thrive.

Tapping into the JBREC demographics dynamic duo of Chris Porter and Eric Finnigan, below are 10 key insights to help guide smarter residential real estate investment and positioning decisions.

10 Need-To-Knows for Homebuilders and Developers

1. Chronic Housing Undersupply: The U.S. needs approximately 18 million homes over the next decade. This shortage, particularly in affordable housing, is driving prices higher and limiting access for many buyers. Builders must focus on efficient land acquisition and developing homes in areas with the greatest supply-demand imbalances.
2. Immigration-Driven Household Formation: With lower birth rates and an aging population, future household growth will increasingly depend on immigration, which contributed to 500,000 new households per year from 2022-2024. Builders should recognize this demand, particularly in rental housing, and adjust their strategies accordingly.
3. Work-from-Home Migration Trends: The work-from-home boom is fueling migration to suburban and exurban areas, where land is more affordable and homebuilders can find development opportunities. Builders should prioritize these areas to capitalize on remote workers' need for larger, more affordable homes.
4. Affordability as a Competitive Advantage: Rising housing prices are making affordability a critical differentiator for builders. Those who can optimize costs and develop homes in lower-cost regions will be better positioned to serve price-sensitive buyers.
5. Robust Rental Demand: As immigration and delayed homeownership drive demand for rental housing, developers should focus on building in high-growth rental markets, especially family-oriented and multi-generational housing in suburban areas.
6. Boost in Labor Supply from Immigration: Recent immigration surges have temporarily relieved labor shortages, improving labor availability for the homebuilding sector. However, builders must plan for future workforce constraints by investing in technology and workforce development.
7. Wealth Transfer Driving First-Time Buyers: A significant wealth transfer from older generations is enabling younger buyers, particularly Gen Z, to enter the housing market. Builders should target these first-time buyers with entry-level homes while ensuring a transparent and trustworthy buying experience.
8. Shifting Migration Patterns: Once-high-growth markets like Austin and Orlando are slowing down, while areas like Indianapolis and Sacramento are gaining residents. Builders need to shift resources toward markets where population growth remains strong, staying agile in response to migration trends.
9. Suburban and Exurban Growth: Suburban and exurban areas continue to capture nearly all population growth, driven by demand for space and affordability. Builders must prioritize these regions and offer homes that cater to remote workers and growing families.
10. Long-Term Uncertainty and Strategic Flexibility: Demographic changes can happen quickly, requiring builders to stay strategically flexible. Continuous monitoring of labor markets, migration patterns, and housing demand will help developers anticipate and respond to shifts effectively.

Action Items

To stay resilient and profitable, homebuilders and developers must adapt to these demographic shifts. Eric Finnigan’s presentation highlights the key strategies needed for success in the next decade:

1. Address Undersupply with Precision: Builders must expand into markets where supply-demand imbalances present opportunities and streamline processes to deliver more affordable housing.
2. Embrace Immigration-Driven Demand: Immigration will remain a key driver of household formation, particularly for rental housing. Builders should adjust their offerings to meet this demand while preparing for the long-term transition of immigrant households into homeownership.
3. Capitalize on Work-from-Home Trends: Suburban and exurban markets will continue to benefit from remote work migration. Builders should focus on these areas and offer homes that cater to remote workers' need for space and affordability.
4. Affordability is Key: Builders who can develop affordable homes by optimizing costs and land use will have a competitive advantage, particularly in regions with lower land prices.
5. Invest in the Rental Market: As demand for rental housing grows, particularly among immigrant and younger households, developers should continue to focus on family-oriented single-family and multi-family rental units in high-demand suburban markets.
6. Expect and Prepare for Labor Shortages: While immigration has temporarily eased labor shortages, long-term workforce challenges remain. Builders need to invest in technology and workforce training to stay competitive.
7. Leverage the Wealth Transfer: The generational transfer of wealth presents an opportunity for builders to target first-time buyers. Offering affordable, entry-level homes and ensuring a trustworthy buying process will build customer loyalty.
8. Stay Agile in Response to Migration: Builders must be ready to shift resources and adapt their strategies as migration patterns evolve. Investing in areas with continued population growth will ensure long-term success.
9. Focus on Suburban and Exurban Development: These regions will continue to see population growth, especially among families and remote workers. Builders should prioritize land acquisition and focus on home designs that meet these households’ needs.
10. Adapt to Long-Term Uncertainty: Strategic flexibility will be essential in navigating the rapidly changing housing market. Builders must continuously monitor demographic trends, migration patterns, and labor markets to stay ahead and remain resilient.

Demographic shifts may be slow to unfold, but they can change quickly. Homebuilders who understand the long-term trends and prepare for short-term shifts will be best positioned for resilience and profitability,” Finnigan concludes.

By adapting to evolving people and household patterns and forces, homebuilders and developers can ensure their long-term success in an increasingly dynamic – read "volatile" – housing market.