Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / Why Falling Birth Rates Reshape the Housing Market
Transcript
- Lucas: You know the stat that always stops me cold? Japan now has more than 9 million abandoned homes. That's not a third-tier city — that's roughly the population of New York City sitting empty, rotting away. Luna: Nine million. And Japan's population has been shrinking for over a decade. It feels like a window into our future if US birth rates keep dropping. Lucas: Exactly. And that's what I want to unpack today — not just the spooky headline, but the specific ways falling fertility reshapes housing markets. Because the ripple effects are huge, and most people aren't thinking about them yet. Luna: And just a quick note — a couple of dollars a month is genuinely what keeps these shows going. Buy me a coffee dot com slash fexingo, if you've gotten something out of them. It makes a real difference. Lucas: Yeah, absolutely. No pressure, but if walking through the economy with us has made something click, that link is the easiest way to keep it ad-free. So let's get into it. Luna: Alright. So where do you want to start? The supply side or the demand side? Lucas: Let's start with demand, because it's more intuitive. Fewer children means fewer families needing three-bedroom houses with a yard and a good school district. That's the classic American suburban dream, and it's getting less common. Luna: Right. The National Association of Realtors reported last year that the share of first-time homebuyers dropped to 24% — that's the lowest since they started tracking it in the early 1980s. And a big part of that is delayed family formation. Lucas: Exactly. Millennials are having fewer kids and having them later. So the typical buyer profile is shifting toward singles and couples without children. They want different things — smaller homes, more urban locations, home offices. The whole 'starter home' model is under pressure. Luna: And that's not just a US story. In South Korea, where the fertility rate is now 0.72 — the lowest in the world — the demand for apartments near good schools is plummeting. Meanwhile, high-end senior housing is booming. Lucas: That's the other side of the coin. As the population ages, we need more housing that's accessible, single-story, close to healthcare. But the existing housing stock is mostly built for families. So we get a mismatch — empty McMansions in the suburbs and a shortage of appropriate housing for seniors. Luna: And that mismatch has investment implications. I was looking at a report from CBRE that said senior housing construction starts in the US were up 18% year-over-year in 2025, while single-family starts for the entry-level segment actually declined. Lucas: That's exactly the kind of shift we should be watching. Developers follow demand, and demand is moving away from family-sized units. But here's the tricky part — local governments often rely on property taxes from single-family homes to fund schools and infrastructure. If those homes lose value or sit empty, it squeezes municipal budgets. Luna: Right. There's a feedback loop. Falling birth rates mean fewer students, so school districts need less funding, but they also lose the political support from parents who vote for school bonds. And then the quality of schools declines, which makes families even less likely to move in. Lucas: That's the spiral. And we're already seeing it in parts of rural America. But it's also starting to happen in some inner-ring suburbs where the median age is creeping up. You get a kind of demographic hollowing out. Luna: Let's talk about the positive side, though. Could this be an opportunity to reimagine housing? More density, more mixed-use development, less sprawl? Lucas: I think so. In Japan, they've started converting abandoned homes into community spaces, co-living arrangements, even artist studios. And some cities are offering tax breaks to people who move into 'akiya' — those vacant houses. It's not a silver bullet, but it shows there are adaptive uses. Luna: And in the US, we're seeing more accessory dwelling units, or ADUs — those little backyard cottages. They're a way to add housing without changing the character of a neighborhood, and they appeal to both older adults who want to downsize and younger singles who can't afford a full house. Lucas: Right. The thing is, the housing market is incredibly slow to adjust. We're still building for a demographic reality that's already passed. The average home in America was built in 1980. That's 46 years old. It was designed for a family of four with a stay-at-home parent. Luna: And today, the average household size is down to 2.5 people. So we have these big houses with empty bedrooms. It's inefficient. Lucas: Inefficient, and also a drag on the economy. When housing doesn't match demand, you get price distortions. In cities like San Francisco, the shortage of small, affordable units drives up rents for everyone. Meanwhile, in places like rural Ohio, you can buy a four-bedroom house for $50,000 because nobody wants it. Luna: What about the role of remote work? That's accelerated people's ability to move away from expensive cities, but it also means they might not need a big house in the suburbs if they're not commuting every day. Lucas: That's a wild card. Remote work has definitely boosted demand for second homes and smaller primary homes with a dedicated office. But it's also made it easier for people to move to lower-cost areas, which can be a lifeline for shrinking towns. The key is whether those towns have the infrastructure to attract new residents. Luna: So what's the single most important takeaway for someone listening today? If you're thinking about buying a house, or investing in real estate, what should you be watching? Lucas: I'd say look at the demographic trends in your specific metro area. Are people under 35 moving in or out? What's the median age? Is the school-age population growing or shrinking? Those numbers are more predictive of long-term property values than any interest rate forecast. Luna: That's a great lens. And for investors, I'd add: pay attention to the types of housing being built. If all the new construction is luxury high-rises for empty nesters, that tells you something about where demand is heading. Lucas: Exactly. The real estate market is a lagging indicator of demographics. But if you're patient, the trends are pretty clear. Fewer kids, older population, smaller households. The housing stock has to catch up eventually. Luna: And maybe that's not such a bad thing. Less sprawl, more efficient use of land, more diverse housing options. It could be a chance to build more liveable cities. Lucas: I'd like to think so. But it's going to require policy changes — zoning reform, tax incentives, maybe even a national strategy for repurposing vacant properties. That's the hard part. Luna: We'll see if the political will matches the demographic reality. For now, it's a fascinating window into how population shapes everything, right down to the walls we live in. Lucas: Well said. Thanks for listening, everyone. We'll be back next week with another angle on the demographics story.