Harvard Report Warns Housing Demand to Plunge as Net International Migration Projected to Drop 75% in 2026

For years, the U.S. housing market has been defined by a singular crisis: a chronic lack of supply. But a new variable is rapidly altering the macroeconomic equation. The demand side of the ledger is experiencing a historic contraction.[1]

According to the newly released "State of the Nation's Housing 2026" report by the Harvard Joint Center for Housing Studies (JCHS), underlying demand for residential properties is plunging. The primary catalyst is a severe and sustained drop in net international migration, which is fundamentally rewriting demographic projections for the next decade.[1][3]

The evidence for this demographic shift is stark. After peaking at 2.7 million in 2024, net international migration into the United States fell by more than half to 1.3 million in 2025.

The trajectory is accelerating downward. The U.S. Census Bureau projects that net international migration will plummet another 75 percent in 2026, reaching just 321,000 individuals. To put this in perspective, this figure is roughly one-third of the 900,000 annual average recorded between 2001 and 2019.[1]

Migration is a mechanical driver of housing demand through "household formation"—the rate at which new, independent living units are established. When immigration slows, household formation inevitably follows suit.[1][2]

The JCHS report reveals that U.S. household formation slowed for the third consecutive year in 2025, dropping to 1.1 million. This is a sharp decline from the pandemic-era peak of roughly 2 million in 2021.[1][4]

The long-term projections are even more subdued. Harvard researchers forecast that household formation will average just 700,000 annually over the next decade. In a low-immigration scenario, the U.S. could see 1.7 million fewer households formed by 2035 than previously expected.[1]

The immediate impact of this demographic shift will be felt most acutely in the rental market. Historically, immigrants have accounted for roughly three-quarters of housing demand growth since 2010, and recent immigrants accounted for two-thirds of overall renter household growth in 2024.

The curtailment of immigration is expected to meaningfully suppress rental demand, according to JCHS managing director Chris Herbert. This is already materializing in Sun Belt markets and gateway cities that previously experienced rapid rent increases and relied heavily on international workers.[2]

The drop in migration is compounding a secondary demographic headwind: a stagnation in natural population growth. The U.S. is experiencing fewer births and more deaths as the baby boomer generation ages.[1]

Natural change—defined as births minus deaths—stayed near 519,000 between mid-2024 and mid-2025. This is far below the 1.6 million to 1.9 million range seen during the 2000–2010 decade, making communities increasingly reliant on migration to sustain population growth.

With international arrivals dwindling, population growth is becoming a zero-sum game of domestic migration. Large metro urban counties are particularly vulnerable, facing steep losses from domestic out-migration that are no longer being offset by international arrivals.[1]

A mechanical drop in demand might theoretically suggest an easing of the housing crisis, but experts warn against this conclusion. While reduced demand may cool price appreciation, it does not resolve the structural affordability crisis that has locked millions out of the market.[2][3]

The JCHS report highlights that housing cost burdens have reached record highs. Nearly half of all renter households—22.7 million—spent over 30 percent of their income on housing in 2024, with 12.1 million facing severe burdens of over 50 percent.[1][3]

A drop in aggregate demand does not magically produce deeply affordable units. Currently, 11 million extremely low-income households are competing for just 3.8 million affordable and available rental units.[1][3]

Furthermore, the drop in immigration presents a paradoxical challenge for housing supply. The construction industry relies heavily on immigrant labor. A sustained reduction in international arrivals threatens to exacerbate labor shortages, driving up construction costs and limiting the pace of new homebuilding.[2]

Beyond immigration, domestic household formation is also being suppressed by economic realities facing young adults. A weakened job market, burdensome student debt, and low consumer sentiment are forcing many young adults to delay forming independent households, opting instead to live with family or roommates.[2][3][4]

Residential mobility has also ground to a halt. The share of households that relocated dropped to a record low of 11.2 percent in 2024. Homeowners are locked into below-market mortgage rates, creating a disincentive to move and further constricting the supply of existing homes for sale.[1][3]

The U.S. housing market is entering a complex new phase. The era of unchecked demographic demand is pausing, replaced by a subdued landscape where affordability constraints, locked-in homeowners, and plummeting migration are collectively hitting the brakes on market velocity.[1][2][4]