Last week we discussed the coming real estate inheritance flood (the so-called “Silver Tsunami”) as baby boomers begin to pass along trillions in assets. On the other side of this demographic wave is the lack of babies.  As of 2025, over 70% of US counties were experiencing more deaths than births. For the entire country, deaths are expected to exceed births in 2033.  Fewer children in the next generation means the demand for housing will fall. 

“In 2010, there were 73% more Americans turning 18 than 65. By 2023, that margin had narrowed to just 12%. After 2025, the number of Americans turning 18 will decline each year for at least two decades,” Hamilton Lombard, a demographics program manager for the University of Virginia Weldon Cooper Center for Public Service, wrote in a recent post. 

But history suggests the impact is far more uneven than the headline implies. Japan, Germany, and Italy have all lived through versions of this demographic transition, and none experienced a nationwide housing collapse. 

Japan’s population peaked in 2008, yet real estate outcomes diverged sharply by location. Tokyo and other major employment centers continued to see stable or rising prices, while rural areas hollowed out almost entirely, with homes losing liquidity long before they lost nominal value. Housing didn’t “crash” so much as it became hyper-concentrated.

Germany offers a similar lesson. Despite decades of low fertility and long-term population stagnation, urban housing markets in Berlin, Munich, and Frankfurt saw persistent rent and price pressure, largely driven by immigration and internal migration. At the same time, smaller towns, particularly in eastern regions, quietly declined. 

Italy represents the more pessimistic edge case: low fertility, weak productivity growth, and limited in-migration have led to decades of soft prices and poor liquidity outside a handful of cities like Milan. Again, the pattern was not collapse, but decay: a slow, localized decline.

Demographic decline creates hyper-local outcomes, not national crashes. The US is far more supply-constrained than Japan. This supply constraint should prevent any major crash because of demographic shifts. 

The biggest demographic risk is liquidity. Markets at risk don’t crash. These markets are plagued by slow sales. In many markets across the US, inheritance accelerates the oversupply. Aging homeowners will pass down housing stock faster than new households are formed to absorb it.

From an underwriting perspective, the framework is straightforward:

Consider a region like Southwest Virginia. While SWVA has more deaths than births, regions like SWVA have the colleges and universities, the natural amenities and lower cost of living to attract population from larger boom cities like Charlotte NC. 

In fact, regions like this have seen migration of 25-44 year olds outpace the national average. And as the workforce across the US shrinks, workers will have more choice in where to live. A remote worker boom 2.0 might be on the horizon after 2030 and areas such as SWVA stand to benefit.   

Over the next 20 years, US demographic decline won’t lead to a collapse of the national housing market, but it will quietly strand capital in metros that fail to replace aging homeowners with new households. Long term investors need to begin to use demographic data on births and deaths to underwrite deals and update buy boxes going forward. 

More than half the states have tilted to a buyer’s market, according to an analysis by Realtor.com of housing data across the 50 largest US metros. The top 10 markets with more than six months of supply — the tipping point for a buyer’s market — were concentrated in either the South or the West. Miami ranks number one for buyers, with nearly a year’s worth of inventory. It had a six-month supply last summer, and by November the median list price was hovering around $500,000 down 4.8% from the previous year. That price was unchanged in January. The runup in prices in Miami, like other pandemic boomtowns such as Phoenix, Charlotte, Jacksonville, have taken time to come back to earth and some of these cities are still not cheap. “What has changed is the balance of power in markets like Miami, where homes are sitting longer and the pace of sales has slowed," said Jake Krimmel, a senior economist for Realtor.com.

About 1.1 million American homeowners owed more on their homes than they were worth at the end of last year, which represents only 2.1% of mortgage holders but is the largest number since early 2018 and up nearly 60% from the start of 2025. Also, some 3.2 million borrowers, or nearly 8% of the population, have less than 10% equity in their home, according to data released by Intercontinental Exchange on Feb. 9. There is a clear divide between those who bought prior to 2022, and those who bought after. American homeowners had nearly $17 trillion in equity overall, the ICE report said, and some $11 trillion is available for them to borrow against their property’s value while still maintaining a 20% equity cushion. People “who bought in 2023 or later at the peak of both rates and prices, as well as renters still waiting to enter the market” have less equity, the report said.

JUST BECAUSE

A Montana couple have donated their 38,000-acre cattle ranch to a conservation group rather than sell the land and cash out. Dale and Janet Veseth’s property, valued at $21.6 million, is the largest ever given to the Ranchers Stewardship Alliance (RSA), a nonprofit whose mission statement is to prevent the land from being sold out of ranching families and to conserve the “people, economies, wildlife, and natural landscapes” of the Old West. The Veseths, the third generation of a ranching family that goes back to the 1880s, will continue to work the land until they turn it over to the RSA. “We’ve only been here for a blink of an eye in the grand scheme of things,” Dale Veseth, who helped found the RSA 22 years ago, told the Western Ag Network. “This land will outlast us all. It’s been a privilege to care for it. It’s been a fun ride, and we’re not done yet.”

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