The current constraints on mortgage growth now include tariffs, war and rates, but the Mortgage Bankers Association sees a bigger threat around the corner: slowing population growth.
The MBA's latest monthly forecast showed mortgage originations rising 6% to $2.17 billion this year, then annual growth rates slowing to about 1% in 2027 and 2028 – the edge of the MBA's forecast horizon.
But an MBA white paper released Monday took a close look at threats through 2035 and beyond, primarily from demographic trends. The main point concerned a population that will barely grow through at least 2035.
Young people are having babies at a decreasing rate, the big boomer generation now entering their 80s will be dying at an increasing rate and fewer immigrants will be taking up the slack than in years past.
The report's authors were the MBA's economic team, including Chief Economist Mike Fratantoni.
"Over the past several years, growth in housing demand has slowed as new housing supply has entered the market in many regions," Fratantoni said. "While affordability challenges remain significant, MBA's research highlights the importance of looking beyond today's market conditions to understand the long-term forces shaping housing demand. These findings can help industry participants and policymakers better prepare for future changes in housing and mortgage market dynamics."
Millennial population growth outran home construction for most of the period from 2008 through 2025, causing prices to rise.
"By 2025, demographic conditions shifted," the researchers said. "Demand cooled at the same time that new supply hit the market. In the recent period, vacancy rates climbed, rent growth stalled and for-sale inventories rose. Housing remains expensive relative to income, but affordability is improving as income growth outpaces price and rent gains in many markets."
"Looking ahead, demographic trends are weakening the foundations of housing demand," the researchers said.
If construction continues at its present pace, the result could be an oversupply that causes home prices to fall, raising the risks of lower originations, eroding borrower equity and more missed payments.
Policy makers are now focused on solving a housing shortage of 1.5 million to 7.3 million units. However, conditions have been changing in the past year:
- Rates are less important. "The lock-in effect is easing even as mortgage rates remain between 6% and 6.5%," well above the pandemic lows of about 3%, the MBA said.
- Inventory is rising. The number of existing homes on the market is up about 30% from a year ago. Rental vacancy rates increased from a low of 5.6% in 2022 to 7.3% in 2025 and rents have flattened.
- Housing remains expensive, but affordability is improving. "As demand softens and oversupply grows in many markets, household incomes are growing faster than home prices and rents," the MBA said.
But the MBA said the expected slowdown in household growth will overshadow those trends.
The Congressional Budget Office's January 2026 estimate of the population in 2035 was 357.3 million, 6.8 million lower than its January 2025 estimate, and the overall population is only projected to increase from 349 million today to 364 million people in 2056. By 2030, The CBO predicted deaths will exceed births.
The MBA has called household growth "the primary driver of long-run housing demand." As it slows over the next two decades, it raises the possibility for oversupply and falling prices.
Falling prices can help both renters and first-time homebuyers, but the MBA said it raises other risks.
"The most direct impact is on origination volume, as fewer households purchasing homes means fewer loans," the MBA said.
"For existing homeowners, falling prices would erode equity, limiting access to cash-out refinancing and increasing the likelihood of selling at a loss," the MBA said.
Falling prices can push more of today's homebuyers underwater on their mortgages.
"Recent borrowers and those with low down payments are most vulnerable, as they have the least equity cushion to absorb a price decline," the researchers said. "Underwater borrowers who experience an income shock are at the greatest risk of default, which suggests additional consequences for mortgage servicers due to the potential for advances, loss mitigation costs and extended resolution timelines."
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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