Population Growth Decreasing
According to the U.S. Census Bureau, population growth has slowed in the last 10 years to its lowest level since the 1930s.
Average annual growth between July 2010 and July 2019 was 0.66%, down from the previous decade’s 0.97%.
This trend is not expected to have a significant impact on housing markets, however, as inventory continues to trail demand across the country. Currently, the United States needs 3.8 million additional housing units to match long-term demand.
Furthermore, the population is still increasing, albeit at a slower rate than in decades past. The three states experiencing the most significant growth in the past decade were Texas (grew by 3.85 million people), Florida (grew by 2.67 million people), and California (grew by 2.26 million people).
Figure 1. US Population Growth for Decades: Censuses 1790 to 2020
Population Growth Decline Unlikely to Influence Prices
Even though the growth has slowed, the populations of California, Texas, and Florida do continue to increase each year. Even so, research suggests it’s not population growth but income growth that has the greatest impact on housing prices. In a 2003 study, Karl Case and Robert Shiller compared U.S. housing prices and income growth rates since 1985 and concluded that income growth alone caused nearly all housing price increases across 40 states.
Figure 2. Per Capita Personal Income Growth, 2010 to 2020
What matters most when it comes to pricing, then, is not how many people are moving to or from each state, but how those trends impact per capita income levels. In 2020, per capita personal income in California was $71,480, up from $43,636 in 2010. In Texas, per capita personal income was $58,814, up from $38,276 in 2010. And in Florida, per capita personal income was $55,337, up from $38,137. If per capita income continues to rise, housing prices are likely to continue to rise as well.
Declining population growth is not expected to impact home prices — do not assume affordability will increase as population growth slows.
Per capita personal income growth has a greater effect on an area’s housing prices than population growth. Anticipate housing price hikes in cities currently experiencing an influx of new, wealthy residents.