Central to housing demand is the formation rate for new households.  Marriage, birth rates, immigration, divorce, the number of college graduates, employment opportunities for young people, downsizing (or upsizing) by boomers and moves to change jobs are among the drivers for new household creation.

As prop.text has pointed out numerous times, this phenomena has all sorts of downstream effects on the economy as these new homeowners need insurance, shop for furniture, look for new flooring, hire painters and other tradesmen, and buy plants and other stuff to make a house a home. 

But perhaps the biggest life event that creates housing demand is baby making. New parents are often looking to move out of an apartment, condo or townhouse for the starter home. So the places where the birth rate is higher are more likely to have a market for these houses, usually with 2-3 bedrooms and at least 1.5 baths.

Many states in the US, and most of the countries in the developed West, have seen their birth rates slide. The reasons range from student loan debt for many younger workers, a lack of job opportunities to high entry barriers to purchasing a home keeping many living with their parents into their 30s, and even 40s and beyond.

But there are some states where the fertility rate is healthy, which can lead to a healthy housing market. The CDC measures the general fertility rate with births in a year per 1,000 women ages 15–44.

The total fertility rate estimates how many children the average woman would have if current age-specific birth rates continued throughout her reproductive life. For the purposes of our analysis, we will focus on Kentucky, a red state that has a popular Democrat for governor, Andy Beshear.

Kentucky’s 2023 total fertility rate was approximately 1.805 children per woman, compared with 1.621 nationally. That is relatively high, but still below the roughly 2.1 level associated with long-run population replacement in the absence of migration.

Nationally, Harvard’s Joint Center for Housing Studies projects about 8.6 million net new households from 2025 through 2035, alongside demand for approximately 11.3 million additional housing units. Using that as a guide, net household growth accounts for roughly three-quarters of baseline new-unit demand; the rest comes from replacing demolished or obsolete units, maintaining vacancies and adding second homes.

Kentucky’s relatively high fertility is a positive signal for investors, particularly for:

Kentucky may be better positioned than low-fertility states to maintain:

Starting families earlier also means people may enter the family-housing market earlier, potentially purchasing a house in their late twenties rather than postponing ownership into their late thirties.

Kentucky is also home to some of the most affordable housing markets in the country. WalletHub ranked Louisville, which is the largest city with a population of 644,000, the 25th most affordable city to buy a house. For investors looking for deals to get into the SFR market, the numbers are attractive:

Lexington, the second largest city in the state with about 330,000 people, saw a strong influx of people in 2025, with about 5,200 moving there, according to US Census data. 

Kentucky sits between the Midwest manufacturing belt and the growing Southeast. It is cheaper than much of the traditional industrial Midwest. Its relative affordability allows companies to locate not just production facilities but entire supplier ecosystems there. Once suppliers begin following Ford, Toyota, GE or other anchor manufacturers, the economic effect becomes more persistent and less dependent on any single plant.

Select Kentucky manufacturing corridors are set up to experience above-average demand for affordable, family-sized housing because industrial investment attracts and retains younger workers who form families earlier than the national average.

Kentucky’s advantage is not simply that it is inexpensive or that it has a relatively high fertility rate. It is the combination of industrial investment, housing affordability, younger family formation, and the potential development of self-reinforcing supplier clusters. That combination could allow certain Kentucky markets to outperform other manufacturing centers over the coming decade.

Restrictions on build-to rent housing were removed from the final version of the 21st Century ROAD to Housing Act, after many, many housing experts defended this increasingly important solution to the housing shortage. In 2025, at least 68,000 new single-family housing starts were built to rent but the National Association of Home Builders think the number may be 100,000 homes or more, according to Brian Potter’s Construction Physics newsletter. (This is more than 7% of housing starts last year vs. only 2% in the 1990s.) Some years ago, proptext’s brain trust wrote about BTR, and the thesis of that essay was that it appealed to dog owners, of which this country has many. Potter noted another benefit was that it provided access to good school districts to people who couldn’t otherwise afford to live there. A paper in Real Estate Economics confirmed this and wrote: “We find that children in renter households were more likely to experience improvements in school quality when relocating to areas with an ample supply of SFRs zoned for high-performing schools.”

Trouble is looming for TV home makeover shows and house flippers gone wild as it appears the DIY movement in America may be running out of gas. Homes in need of renovations are in much lower demand this year compared to last year, Zillow reported. Fixer-uppers, long viewed as a more affordable way into the housing market, are selling at a 14% discount compared to move-in-ready homes – the largest spread it has recorded in years. Last year fixer-uppers sold for 7.3% less than those that don’t need work. CNN says that the fixer-upper math “no longer pencils out. Tariffs, inflation and a shortage of construction workers have made home improvement projects significantly more expensive — and often more time-consuming — over the past few years.”

A Federal Reserve economist says the home ownership rate is much lower than what has been reported because we are measuring it incorrectly. Erik Hembre says the rate is closer to 53%, less than the 65% rate reported across the US. (In some states, the rate is reportedly as high as 75%.) The rate is measured by counting the percentage of homes occupied by their owners, so if there are 10 homes on a street and seven of them are owner-occupied and three are rented, it’s said to be 70%. Hembre came up with HPOP: the homeowners-to-population ratio. He counted Americans over 18 years of age, then looked at how many of them live in a home they own and came up 53 percent. A relative living in a relative’s house or a person renting a room from a friend, or adult children living with parents do not qualify as homeowners. Hembre told The Washington Post that his work “should reframe the basic number we have in our head. I went from a baseline of about two-thirds of people own their homes and that’s just the way it’s always been, to: Well, it’s closer to half.”

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