What Rebounding Birth Rates Mean for Housing

The beginning of the pandemic spawned a “baby bust,” with birth rates falling to 100-year lows. But economists say that is quickly reversing. Could a baby boom be next? Not necessarily, economists say, but the latest data still shows an increase.

Historically, birth rates tend to go down during recessions and uncertainty in hard times, like pandemics. Birth rates followed that trend early in the pandemic when the states with the largest COVID-19 cases saw the largest declines in births.

From January 2020 to May 2020, job cuts and business shutdowns led to 62,000 “missing births” in the U.S., according to a new paper published by the National Bureau of Economic Research.

Birth rates have an impact on future housing demand, Jessica Lautz, vice president of demographics and behavioral insights at the National Association of REALTORS®, noted on the association’s blog in 2021. Having a baby is often a leading housing decision, prompting new families to buy a home or desire a larger home, Lautz wrote. The decline in births means fewer home buyers with children in the home.

But the baby bust spurred by the pandemic appears to have been short-lived. The study’s authors note how unexpectedly quickly it has recovered. Later in 2020, the birth rate rebounded by 51,000 conceptions. Economists say it was due to fast growth in the labor market and to government relief programs that helped households weather the pandemic’s economic impact.

But Melissa Schettini Kearney, one of the paper’s authors, told MarketWatch that the rebound later in 2020 is “far less significant” compared with the general U.S. trend over the last 15 years, which has resulted in about a 20% decrease in births. The authors note there are no signs of that overall trend reversing, even with the recent uptick in birth rates.

“Births in the U.S. have now fallen well below replacement levels, a situation that has existed in other developed countries for the past few decades,” the authors note. “Such low levels of fertility will affect economic growth, the solvency of public retirement systems, and other economic and social outcomes going forward.”

An earlier paper by the authors reported that highly educated women in their late thirties and early forties were the most likely to delay contraception in the early days of the pandemic outbreak.

Also, other studies are showing a lasting trend: More adults don’t want children. Forty-four percent of adults younger than 50 who don’t have children said they either weren’t likely or were “not at all likely” to have children one day, according to a Pew Research Center survey from October 2021. That is up from 37% in 2018.

In 1985, 58% of home buyers had children under the age of 18. That percentage has since fallen to 33%, according to NAR data.

 

 

Source: “Working Paper: The U.S. COVID-19 Baby Bust and Rebound,” National Bureau of Economic Research (April 2022) and “The Decline in the U.S. Birth Rate Bounced Back From the Early Days of the Pandemic,” MarketWatch (May 3, 2022)