Understanding trends to make smart land, product and capital decisions

For builders, developers and rental operators, 2026 is shaping up to be a year defined by demographic crosscurrents. Some forces are generating pent-up currents. Some forces are generating pent-up demand. Others are slowing household growth in the near term. Understanding which trends matter most and in which markets is increasingly essential to making smart land, product and capital decisions.

Young adults are still a large source of future demand. The U.S. has roughly 45 million adults ages 25–34 and nearly 7.5 million still live with their parents. The share of young adults living at home hit 18% in 2020, the highest level in at least 60 years, before easing to about 16% in 2024, where it has stabilized.The weak job market has slowed the pace of household formation since then. Many young adults simply haven’t had the income security to move out and when they do, they overwhelmingly start in multifamily rentals.

This creates a clear pipeline of pent-up demand. Once employment conditions improve, young adults should re-enter the market, driving demand for rentals.

Immigration slowdown is a short-term headwind.That pent-up demand is colliding with a meaningful drop in net immigration, traditionally a strong contributor to rental growth. According to the Congressional Budget Office’s (CBO) latest estimates, net immigration surged to 3.5 million in 2023, then fell sharply to under 500,000 in 2025.

While the CBO expects inflows to gradually rebuild, averaging about 900,000 annually between 2026 and 2030, rising to 1.2 million by 2035. Today’s weaker numbers are a drag on near-term household formation. Layer in lower births and higher deaths and the result is slowing population growth overall. If immigration continues to lag projections, the U.S. could face population decline within five years.

For builders, this means one thing: The next decade will be defined less by national growth and more by market-level shifts in who is moving and where.

Domestic migration is rewriting the rental map. Over the past six years, domestic migration patterns have swung sharply. Data from the Census Bureau shows dramatic slowdowns across several high growth Sun Belt markets between 2019 and 2025. Florida saw about 115,000 fewer net domestic immigrants in 2025 compared with 2019. Other states with significant pullbacks include Arizona, Texas, Colorado, Nevada, Washington and California.

Meanwhile, several Midwest and Northeast states, usually not migration leaders, posted gains. Illinois had roughly 60,000 more net immigrants than in 2019. New York, Michigan, Ohio, North Carolina and Pennsylvania also saw sizable increases. These shifts are already influencing rental demand, absorption and rent growth and we see those effects most clearly in vacancy data.

Household formation shows the housing market’s pulse. National household growth slowed from about 1.5% in mid-2023 to under 1% by 2025. What’s driving that deceleration? Growth in owner households has weakened, as affordability barriers continue to shut out first-time-time buyers. And growth in renter households has held firmer, reflecting ongoing demand pressure in the rental market. The takeaway for builders is consistent: The for-sale affordability challenge continues to push households toward rental options, reinforcing demand even as overall household growth cools.

The move‑up market is gradually thawing in 2026. The move‑up segment, largely frozen during the 2023–2025 rate shock, is finally showing early signs of mobility, though progress remains uneven across markets. Rising resale inventory is one of the biggest catalysts. By late 2025, active listings reached their highest levels since late 2019, with roughly 50% of the largest 100 metropolitan areas holding more inventory than in late 2019. That shift gives existing homeowners more confidence that they can both sell and buy, loosening a key bottleneck in the move‑up pipeline. 

At the same time, mortgage rate stabilization in the low 6% range is helping reduce some of the “rate lock” effect that kept millions of owners, most holding sub‑4% mortgages, from listing their homes. Forecasts for 2026 point to continued stabilization rather than dramatic declines in interest rates, but even modest rate relief expands the pool of homeowners able to trade up. 

Still, the move‑up market is not yet operating at full strength. Sellers face more competition, longer days on market and a need for pricing realism as buyers regain negotiating leverage. New construction is benefiting from this dynamic: builders offering rate buydowns and transparent pricing are capturing demand from move‑up households who want predictability and modern features without the friction of the resale market. 

Molly Boesel is a Senior Principal Economist at Cotality. She can be reached at newsmedia@cotality.com. 

This column is featured in our March issue of Builder and Developer, read the print version here.