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Builder Sentiment at Third Lowest Reading Since 2012

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In a further sign of declining builder sentiment, the use of price incentives increased sharply in June as the housing market continues to soften.

Builder confidence in the market for newly built single-family homes was 32 in June, down two points from May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The index has only posted a lower reading twice since 2012 – in December 2022 when it hit 31 and in April 2020 at the start of the pandemic when it plunged more than 40 points to 30.

Buyers have increasingly moved to the sidelines due to elevated mortgage rates and tariff and economic uncertainty. Consequently, the latest HMI survey revealed that 37% of builders reported cutting prices in June, the highest percentage since NAHB began tracking this figure on a monthly basis in 2022. This compares with 34% of builders who reported cutting prices in May and 29% in April. Meanwhile, the average price reduction was 5% in June, the same as it’s been every month since last November. The use of sales incentives was 62% in June, up one percentage point from May.

Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines for resales in a growing number of markets. Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three of the major HMI indices posted losses in June. The HMI index gauging current sales conditions fell two points in June to a level of 35, the component measuring sales expectations in the next six months dropped two points lower to 40 while the gauge charting traffic of prospective buyers posted a two-point decline to 21, the lowest reading since November 2023.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 43, the Midwest moved one point higher to 41, the South dropped three points to 33 and the West declined four points to 28. HMI tables can be found at nahb.org/hmi.

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Student Housing Construction Investment Rises in the First Quarter of 2025

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Private fixed investment in student dormitories increased by 2.3% in the first quarter of 2025, reaching a seasonally adjusted annual rate (SAAR) of $4.04 billion. This gain followed a 1.0% increase in the previous quarter. However, private fixed investment in dorms was 2% lower than a year ago, as elevated interest rates place a damper on student housing construction.  

Private fixed investment in student housing experienced a surge after the Great Recession, as college enrollment increased from 17.2 million in 2006 to 20.4 million in 2011. However, during the pandemic, private fixed investment in student housing declined drastically from $4.4 billion (SAAR) in the last quarter of 2019 to a lower annual pace of $3 billion in the second quarter of 2021, as COVID-19 interrupted normal on-campus learning. According to the National Student Clearinghouse Research Center, college enrollment fell by 3.6% in the fall of 2020 and by 3.1% in the fall of 2021.  

Since then, private fixed investment in dorms has rebounded, as college enrollments show a gradual recovery from pandemic driven declines. Effective in-person learning requires college students to return to campuses, boosting the student housing sector.  Still, demographic trends are reshaping the outlook for student housing. The U.S. faces slower growth in the college-age population as birth rates declined following the Great Recession. As a result, total enrollment in postsecondary institutions is projected to only increase 8% from 2020 to 2030, according to the National Center for Education Statistics, well below the 37% increase between 2000 and 2010. 

Despite recent fluctuations, the student housing construction shows signs of recovery and future growth is expected in response to increasing student enrollment projections. 

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House Sharing is Not Just for Young Adults

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A record-high 6.8 million households shared their housing with unrelated housemates, roommates or boarders in 2023. While college-age and young adults make up the largest subset of house sharers (close to 41%), this type of living arrangement is gaining popularity among older householders fastest, with the 55+ segment accounting for 30% of all house-sharing households in 2023.

The number of households sharing housing with nonrelatives had been rising steadily since the 2008 housing crash until the COVID-19 pandemic interrupted the upward trend. During that period, the count of households with at least one unrelated member increased from 5.3 million in 2008 to over 6.7 million in 2019. At the same time, the percentage of house-sharing households grew from 4.7% to 5.4%.

The pandemic dramatically redefined living arrangement preferences. Reflecting the shift towards more spacious, lower-density independent living, the number and percentage of house-sharers collapsed in 2020 (although the data collection issues during the lockdown stages of the COVID-19 pandemic make the 2020 estimates less reliable).  While the percentage of households sharing housing has climbed since the pandemic lows, it remains below the 2019 peak. However, the count of house-sharing households in the U.S. is now at a new record-high point. This is largely reflective of a faster household formation rate since the end of the pandemic, as well as the growing popularity of home sharing arrangements.

Young Adults (25-34)

Young adults in the 25-34 age group make up the largest (close to 1.6 million, or 23%) cohort of households that share housing with unrelated housemates. Over the last two decades, amid the rising housing burdens and cost of living, house sharing became a way for young adults to afford to leave parental homes. From 2005 to 2017, as the headship rates for this age group declined precipitously and millions of young adults dropped out of the housing market, house sharing became more common among those who managed to stay out of parental homes. In 2017, when 25 to 34-year-old adults registered record low headship rates, one in eleven householders in this age group shared housing with unrelated housemates. By 2023, when the headship rates rebounded, the share of 25 to 34-year-old house-sharing householders dropped to 7.9%, on par with the 2005 reading.

While it is tempting to assume that the high prevalence of house sharing among young adults reflects a rise in unmarried partnerships, these are not considered house-sharers in this analysis.  Unmarried partners tend to function as a unit similar to a married couple, dividing their economic, social and financial responsibilities, and not just those related to house-sharing. To differentiate between these different demographic trends, unmarried partnerships are counted as independent households for the purposes of this analysis.

College-Age Adults (18-24)

College-age adults make up the second largest group of house-sharing householders (1.2 million, or 17%). While the total counts are substantial, they represent a decline since 2005 when 1.3 million 18 to 24-year-old householders shared housing with unrelated roommates, accounting for 22% of house-sharing households.  The lower counts of house sharers in this age group reflect, among other factors, the rising share of college-age adults living with parents, declining rates of college attendance in recent years, as well as slower youth population growth. Nevertheless, the youngest householders remain the age group that is most likely to share housing. As of 2023, over one in five leaseholders/homeowners in the 18-24 age group shared housing with unrelated roommates or housemates.

Older Adults 55+

Older adults ages 55 and over registered the most substantial gains in house-sharing arrangements since the housing boom of the mid-2000s[1]. The number of households lead by 55 to 64-year-old adults that shared housing almost doubled since 2005 to 1 million. Their segment increased from 9% of house-sharing households in 2005 to 14% in 2023. At the same time, the number of house-sharers among 65+ householders increased 2.7 times. These oldest householders now account for over a million, or 15% of all house-sharing households, more than doubling their share of 6.8% in 2005.

Partially, the surge in the number of older households sharing housing with nonrelatives simply reflects the aging U.S. population with numerous baby boomers filling the ranks of 55+ households. Partially, it captures the changing preferences, as the older householders are now more likely to live with unrelated members. In 2005, 3% of 55 to 64-year-old householders shared housing with nonrelatives. This share increased to 3.6% in 2013 and continued its climb to 4.1% in 2023. The increase in the percentage of 65+ householders sharing housing was similarly persistent, rising from 1.7% in 2005, to 2.3% in 2013, and climbing further to reach 2.8% in 2023.

Unlike the rates of house-sharing among younger adults, the rates for the 55+ age group appear less cyclical. While still largely unconventional among 55 and older householders, house sharing is on the rise, potentially offering a cost-effective option for older adults to stay in place as they age.

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Manufactured Homes: An Alternative Means of Housing Supply

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Manufactured homes play a measurable role in the U.S. housing market by providing an affordable supply option for millions of households. According to the American Housing Survey (AHS), there are 7.2 million occupied manufactured homes in the U.S., representing 5.4% of total occupied housing and a source of affordable housing, in particular, for rural and lower income households.

Often thought of as synonymous to “mobile homes” or “trailers”, manufactured homes are a specific type of factory-built housing that adheres to the U.S. Department of Housing and Urban Development’s (HUD’s) Manufactured Home Construction and Safety Standards code. To qualify, a manufactured home must be a “movable dwelling, 8 feet or more wide and 40 feet or more long”, constructed on a permanent chassis.

The East South Central division (Alabama, Kentucky, Mississippi and Tennessee) have the highest concentration of manufactured homes, representing 9.3% of total occupied housing. The Mountain region follows with 8.5%, while the South Atlantic region holds 7.7%.

The 1990s saw a surge in manufactured home shipments, peaking in 1998. During this period, manufactured homes constituted 17% to 24% of new single-family homes.  However, shipments declined in the early 2000s, coinciding with a rapid increase in site-built housing construction leading up to the 2008 housing crisis. Since then, manufactured homes have stabilized at around 9% to 10% of new housing.

Characteristics of the 2023 Manufactured Home Stock

Given that most manufactured homes were produced in the 1990s, a significant portion of the existing manufactured home stock — approximately 72.2% — was built before 2000. Consequently, 7.7% of these homes are classified as inadequate compared to 5% of all homes nationwide. About 2% are considered severely inadequate and exhibit “major deficiencies, such as exposed wiring, lack of electricity, missing hot or cold running water, or the absence of heating or cooling systems”. However, with proper maintenance, manufactured homes can be as durable as site-built homes.

Currently, 57% of the occupied manufactured homes stock are single-section units, while 43% are multi-sections, according to the AHS. Single-section homes are manufactured homes that can be transported from factory to placement in a single piece while multi-sections are transported in multiple pieces and are joined on site. However, data from the Census show that newer shipments indicate a shift toward multi-section homes.

Most single-section homes are less than 1,000 square feet and contain five total rooms in the house — typically two bedrooms and three bathrooms. In contrast, multi-section homes usually range from 1,000 to 2,000 square feet and have six rooms, comprising three bedrooms and three bathrooms.

Demographics of Manufactured Homes Residents

Manufactured homes serve as a crucial housing option, particularly for those living in rural or non-metro areas. AHS data highlight a stark contrast between the locations of single-family and manufactured home residents. While most manufactured home residents (53%) live in rural areas, single-family residents are mostly concentrated (67%) in urbanized areas — defined as territories with a population of 50,000 or more. In comparison, only 33% of manufactured home residents reside in urbanized areas. Residents of both manufactured and single-family homes are less common in urban clusters — areas with populations between 2,500 and 50,000 — comprising just 13% and 9%, respectively.

The median age of a manufactured home householder is 55, the same as single-family householders. However, most manufactured home householders (37.8%) have an education attainment level of high school completion compared to single-family householders whose largest group (24.8%) have completed a bachelor’s degree.

Income disparities are also significant. The median household income for manufactured home residents is $40,000, far below the $85,000 median income for single-family householders. The gap widens among homeowners, with manufactured homeowners earning a median of $41,500 versus $93,000 for single-family homeowners.

Household CharacteristicManufactured Homes HouseholdSingle-Family HouseholdAge (Median)5555Majority Education Attainment LevelHigh school or equivalency (37.8%)Bachelor’s degree (24.8%)Annual Household Income (Median)$40,000$85,000Annual Household Income of Homeowners (Median)$41,500$93,000Sources: 2023 American Housing Survey (AHS) and NAHB analysis.

Cost of Buying and Owning Manufactured Homes

One of the key advantages of manufactured homes is affordability. The average cost per square foot for a new manufactured home in 2023 was $86.62, compared to $165.94 for a site-built home (excluding land costs) — a difference of $79.32 per square foot. This difference in cost has only grown over the decade from $51.84 per square foot in 2014. For a 1,500-square-foot home, this translates to a savings of approximately $118,980, and this savings has grown despite the average cost of manufactured homes increasing at a higher growth rate of 7.4% CAGR versus 6.1% CAGR for new single-family homes.

Owning a manufactured home is also more affordable in total housing cost, which includes mortgage payments, insurance, taxes, utilities and lot rent. According to the AHS, owners of a single-section manufactured home have a median total monthly housing cost of $563, while the cost for a multi-section home is $805. In contrast, the median monthly cost of owning a single-family home is $1,410.

Despite the lower costs associated with manufactured homes, affordability remains a challenge for many owners. Among single-section manufactured homeowners, 36.6% are considered cost-burdened, meaning they spend 30% or more of their income on housing. This is slightly higher than the 28.4% of multi-section manufactured homeowners and the 27.6% of single-family homeowners facing similar financial strain. This disparity underscores the reality that even though manufactured homes are a more affordable option, lower-income households are still disproportionately burdened by housing costs.

Manufactured Home Pricing

Data on manufactured home appreciation is limited. However, the Federal Housing Finance Agency (FHFA) publishes a quarterly house price index for manufactured homes. Comparing the indices for manufactured and site-built homes, manufactured homes have closely followed the appreciation trends of their site-built counterparts. Between the first quarter of 2000 and the last quarter of 2024, the index value for manufactured homes increased by a cumulative 203.7%, slightly surpassing the 200.2% increase for site-built homes. This indicates that the manufactured home markets face much of the same demand opportunities and supply challenges of the broader housing market.

It is important to note that this data reflects only manufactured homes financed through conventional mortgages as real property, acquired by Fannie Mae and Freddie Mac (the Enterprises). In contrast, the majority of new manufactured homes are titled as personal property, which is not eligible for conventional mortgage financing because the Enterprises do not acquire chattel loans. Nonetheless, it is common for manufactured homes to be placed on private land even though the unit is under a personal property title — a title that applies to movable assets, such as vehicles, tools or equipment, and furniture, whereas a real estate property title includes land and any structures permanently attached to it.

Despite this distinction, there has been a steady increase in the share of manufactured homes titled as real estate. Since 2014, the percentage of real estate-titled manufactured homes has grown from 13% to 20% in 2023, indicating a positive trend toward greater financial recognition and stability for these homes.

Zoning Restrictions and the Future of Manufactured Homes

Manufactured homes provide a cost-effective housing solution, particularly in rural areas where the transportation and material costs for site-built homes can be significantly higher. However, restrictive zoning laws often limit their placement in urban areas. Regulations such as bans on manufactured home communities and large lot size requirements can substantially increase costs, making it difficult to establish manufactured housing in cities. Reducing these zoning barriers could not only expand affordable housing options in high-cost urban areas but also improve access to essential services such as healthcare and economic opportunities for lower-income communities.

A successful example of zoning reform comes from Jackson, Mississippi, where city officials partnered with the Mississippi Manufactured Housing Association (MMHA) to launch a pilot program highlighting the potential of prefabricated and manufactured homes as affordable housing solutions. As part of the initiative, the city revised its zoning regulations to distinguish manufactured and modular housing from pre-1976 “mobile homes,” which had long been banned. Previously, manufactured homes were classified under the same category, restricting their placement. The new ordinance now permits manufactured housing within city limits, albeit with a discretionary use permit, paving the way for greater affordability and accessibility in urban housing.

Conclusion

Manufactured homes make up only 5% of the total housing stock but provide an alternative form of housing that meets the needs of various households, particularly in rural areas. Although they offer a lower-cost option compared with site-built homes, factors such as an aging housing stock, financing limitations and zoning restrictions could influence their accessibility and long-term viability.

Trends such as the increasing prevalence of multi-section homes and a growing share of units titled as real estate suggest a gradual shift in consumer preferences toward housing options that more closely resemble site-built homes in size, functionality and financing. As housing affordability remains a key concern, manufactured homes continue to play a role as an affordable supply in the broader housing landscape, and expanding their use through education, innovation and zoning reform could improve access to cost-effective housing.

Footnotes:

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Single-Family Built-for-Rent Construction Falls Back

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Single-family built-for-rent construction posted year-over-year declines for the fourth quarter of 2024, as a higher cost of financing crowded out development activity. This slowdown is similar to the deceleration of multifamily construction in recent quarters.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 15,000 single-family built-for-rent (SFBFR) starts during the fourth quarter of 2024. This is 38% lower than the fourth quarter of 2023. Over the last four quarters (2024 as a whole), 83,000 such homes began construction, which is an 8% increase compared to the 77,000 estimated SFBFR starts in the four quarters prior to that period (2023 as a whole).

The SFBFR market is a source of inventory amid challenges over housing affordability and downpayment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in terms of structural characteristics compared to other newly-built single-family homes, particularly with respect to home size. However, investor demand for single-family homes, both existing and new, has cooled with higher interest rates.

Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (8%) is nonetheless higher than the historical average of 2.7% (1992-2012).

Importantly, as measured for this analysis, the estimates noted above include only homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another three to five percent of single-family starts based on industry surveys.

The Census data notes an elevated share of single-family homes built as condos (non-fee simple), with this share averaging more than 4% over recent quarters. Some, but certainly not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given these units are often built on a single plat of land. However, spot checks by NAHB with permitting offices indicate no evidence of this data issue occurring.

With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly expanded. Given affordability challenges in the for-sale market, the SFBFR market will likely retain an elevated market share. However, in the near-term, SFBFR construction is likely to slow until the return on new deals improves.

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A Pause for the Fed

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In a widely anticipated announcement, the Federal Reserve paused on rate cuts at the conclusion of its January meeting, holding the federal funds rate in the 4.25% to 4.5% range. The Fed will continue to reduce its balance sheet, including holdings of mortgage-backed securities. The Fed noted the economy remains solid, while specifying a data dependent pause. Chair Powell did qualify current policy as “meaningfully restrictive,” but the central bank appears to be in no hurry to enact additional rate cuts.

While the Fed did not cite the election and accompanying policy changes today, the central bank did note that its future assessments of monetary policy “will take into account a wide range of information, including readings on labor market conditions, inflation pressures, and inflation expectations, and financial and international developments.” Given the ongoing, outsized impact that shelter inflation is having on consumers and inflation, an explicit mention to housing market conditions would have been useful in this otherwise exhaustive list.

Chair Powell did state in his press conference that housing market activity appears to have “stabilized.” A reasonable assumption is that this is a reference to an improving trend for rent growth (for renters and owners-equivalent rent), but the meaning of this statement is not entirely clear given recent housing market data and challenges. While improving, shelter inflation is running at an elevated 4.6% annual growth rate, well above the CPI. These housing costs are driven by continuing cost challenges for builders such as financing costs and regulatory burdens, and other factors on the demand-side of the market like rising insurance costs. And more fundamentally, the structural housing deficit persists.

From the big picture perspective, the Fed faces competing risks for future policy given changes in Washington, D.C. Tariffs and a tighter labor market from immigration issues represent upside inflation risks, but equity markets have cheered prospects for an improved regulatory policy environment, productivity gains and economic growth due to the November election. These crosswinds may signal a lengthy pause for monetary policy as the Fed continually seeks more short-term data.

While the Fed targets short-term interest rates, long-term interest rates have risen significantly since September, as a second Trump win came into focus. A future risk for long-term interest rates and inflation expectations will be fiscal policy and government debt levels. Extension of the 2017 tax cuts will be good for the economy, but ideally these tax reductions should be financed with government spending cuts. Otherwise, a larger federal government debt will place upward pressure on long-term interest rates, including those for mortgages.

The January Fed statement acknowledged the central bank’s dual mandate by noting that it would continue to assess the “balance of risks.” There was no language in today’s statement pointing to a future cut, although markets still expect one or two reductions in 2025 if inflation remains on a moderating trend.

Importantly, the Fed reemphasized that it is “strongly committed to support maximum employment and returning inflation to its 2 percent objective.” That seemed like a shot across the bow for those speculating that the Fed might be satisfied with achieving an inflation rate closer to but not quite 2%. While there is merit to debating the 2% policy, the emphasis today on the 2% target is a reminder of how important the housing market and housing affordability is for monetary policy and future macroeconomic trends.

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Fed Cuts But Signals Slowing Pace of Easing Ahead

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In a widely anticipated move, the Federal Reserve’s Federal Open Market Committee (FOMC) reduced the short-term federal funds rate by an additional 25 basis points at the conclusion of its December meeting. This policy move reduces the top target rate to 4.5%. However, the Fed’s newly published forward-looking projections also noted a reduction in the number of federal funds rate cuts expected in 2025, from four in its last projection to just two 25 basis point reductions as detailed today.

The new Fed projection envisions the federal funds top target rate falling to 4% by the end of 2025, with two more rate cuts in 2026, placing the federal funds top target rate to 3.5% at the end of 2026. One final rate is seen occurring in 2027. Furthermore, the Fed also increased its estimate of the neutral, long-run rate (sometimes referred to as the terminal rate) from 2.9% to 3%, which is reflective of stronger expectations for economic growth and productivity gains.

For home builders and other residential construction market stakeholders, the new projections suggest an improved economic growth environment, one in which there is a smaller amount of monetary policy easing, leading to higher than previously expected interest rates for acquisition, development and construction (AD&C) loans. Thus, more economic growth but higher interest rates.

The statement from the December FOMC summarized current market conditions as:

Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.

The Fed’s broader economic projections generally experienced positive revisions. The central bank lifted its forecast for GDP growth in 2025 to 2.1%. It sees the unemployment rate at 4.3% at the end of 2025, down from 4.4%.

However, the Fed also increased its inflation expectations. The central bank now sees 2.5% core PCE inflation at the end of 2025, up from its prior projection of 2.1%. While long-run expectations of the FOMC remained anchored at the 2% inflation target, the increase for the 2025 expectation for inflation is the reason for taking two rate cuts off the table for 2025, leaving just two remaining in the forecast.

Despite 100 basis points of easing for the short-term federal funds rate since September, long-term interest rates (which are set by markets and investors), including mortgage rates, have increased. This reflects market expectations of firmer inflation and a slower path for monetary policy easing. Policy concerns over government deficits and perhaps tariffs are also affecting investor outlooks. The size of the government deficit will be key for future inflation and long-term interest rates, particularly given a significant debate on taxes and government spending set for the start of 2025. And the slower path of monetary policy easing pushed the 10-year Treasury rate to 4.5%.

The pace of overall inflation is moving lower albeit slowly. Shelter inflation continues to be a driver of overall inflation, with gains for housing costs responsible for 65% of overall inflation over the last year. This kind of inflation can only be tamed in the long-run by increases in housing supply. Fed Chair Powell has previously noted it will take some time for rent cost growth to slow although it is moving lower. Given recent tight financing conditions, however, the Fed noted that while consumer spending is resilient, “…activity in the housing sector has been weak.” A slower path of Fed rate cuts for 2025 will keep builder and developer construction loan interest rates higher than previously expected and act as an additional headwind for gains in housing supply.

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Gains for Townhouse Construction

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Year-over-year gains for townhouse construction continued during the third quarter of 2024 as demand for medium-density housing continues to be solid despite slowing for other sectors of the building industry.

According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the third quarter of 2024, single-family attached starts totaled 47,000, matching the highest quarterly count for townhouse construction since mid-2006. Over the last four quarters, townhouse construction starts totaled a strong 177,000 homes, which is 20% higher than the prior four-quarter period (148,000). Townhouses made up 18% of single-family housing starts for the third quarter of the year, a data series high.

Using a one-year moving average, the market share of newly-built townhouses stood at 17.4% of all single-family starts for the third quarter. With recent gains, the four-quarter moving average market share remains at the highest on record, for data going back to 1985.

Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6%, on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s.

The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Where it can be zoned, it can be built.

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Student Housing Construction Investment Rises in the Third Quarter of 2024

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Private fixed investment in student dormitories increased by 2.2% to a seasonally adjusted annual rate (SAAR) of $3.9 billion in the third quarter of 2024. This rise follows a 7% decrease in the prior quarter. However, private fixed investment in dorms was 1.8% lower than a year ago, as the elevated interest rates place a damper on student housing construction.  

Private fixed investment in student housing experienced a surge after the Great Recession, as college enrollment increased from 17.2 million in 2006 to 20.4 million in 2011. However, during the pandemic, private fixed investment in student housing declined drastically from $4.4 billion (SAAR) in the last quarter of 2019 to a lower annual pace of $3 billion in the second quarter of 2021, as COVID-19 interrupted normal on-campus learning. According to the National Student Clearinghouse Research Center, college enrollment fell by 3.6% in the fall of 2020 and by 3.1% in the fall of 2021.  

Since then, private fixed investment has rebounded, as college enrollments show a slow but stabilizing recovery from pandemic driven declines. Effective in-person learning requires college students to return to campuses, boosting the student housing sector. Furthermore, the demand for student housing is growing robustly, because total enrollment in postsecondary institutions is projected to increase 8% from 2020 to 2030, according to the National Center for Education Statistics. 

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Share of Young Adults Living with Parents by Congressional District

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Building on the post-pandemic trend, the share of young adults (aged 25-34) living with their parents fell to a decade low, according to NAHB analysis of 2022 American Community Survey (ACS) Public Use Microdata Sample (PUMS). However, young adults continue to face difficult decisions about their living arrangements due to elevated home prices and increasing costs of living. While some young people established independent households during the pandemic, according to 2023 ACS data, many young adults continue to live with their parents in higher-cost areas, with variations across states and congressional districts.

In general, the share of young adults (aged 18-34) living with parents positively correlates with housing costs, particularly in coastal areas. This trend reflects young adults’ increasing financial burdens as both rents and home prices surge. A previous post demonstrated that more than half of renter households spend 30% or more of their income on housing, suggesting that affordability issues may delay young adults’ independence and path to homeownership.

In 2023, 31.8% of young adults (aged 18-34) lived with their parents at the national level using 2023 ACS data. Across congressional districts, the share of young adults living with parents varies significantly, reflecting different local housing affordability challenges. The shares are generally higher than the previous study, as this analysis includes adults aged 18-24. The top five congressional districts with the highest shares of young adults living with parents are located in areas with high housing costs and limited rental options. These districts include:

New York, District 3, 58.6%

New York, District 4, 56.5%

New York, District 1, 56.5%

California, District 38, 54.0%

New Jersey, District 5, 53.4%

In contrast, the bottom five congressional districts with the lowest shares of young adults living with parents are in major cities known for high housing costs, low homeownership rates and robust rental markets. As rental options provide more independence, a higher share of renter households in California, New York and Washington appears to be associated with fewer young adults living with parents. The bottom five districts include:

New York, District 12, 8.4%

Texas, District 37, 9.6%

California, District 11, 11.6%

Washington, District 7, 11.7%

District of Columbia, At Large, 12.2%

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This article was originally published by a eyeonhousing.org . Read the Original article here. .

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