The housing market is slowing largely due to lagging household growth, according to the Harvard Joint Center for Housing Studies’ 2026 State of the Nation’s Housing report.

After surging to an annual average of 2 million households in 2020 and 2021, household growth was just 1.1 million in 2025, consistent with the more modest levels averaged across the 2010s. Household growth is a key driver of housing demand.

Weakening labor markets and plummeting immigration have dampened household growth and mobility, the report says. New housing construction softened again in 2025, reflecting weakening demand and rising inventories.

Rising inventory is also a drag on housing construction. After hitting historic lows in 2022 and 2023, national homeowner and renter vacancy rates are on the rise, reaching 1.1% for homeowners and 7.3% for renters in the first quarter of 2026. 

Both rates remain below historic averages and at least several hundred thousand units are still needed to meet demand. The trends are inconsistent across the country, with the South seeing the largest vacancy rate rebound and the Midwest scoring the smallest.

The most serious and intractable housing shortage involves units affordable to households with low and moderate incomes. According to the National Low Income Housing Coalition (NLIHC), 11 million households with extremely low incomes competed for 3.8 million affordable and available rental units in 2024.