Fannie Mae Updates Demographic Projections

In 2023, the U.S. Census released updated U.S. population projections for the 2023-2100 time horizon, the first update since 2017.¹ Updated Census population projections allowed Fannie Mae's Economic and Strategic Research (ESR) Group to update its projections of total households and households-by-tenure (own or rent) through the year 2032. Those projections use historical Decennial Census and American Community Survey (ACS) data that includes these data on household formation and ownership by age and race.

Below, we provide an overview of the methodology and our outlook regarding projected growth in total households, owner households, and renter households over the 2023-2032 time period. In our short-term outlook we project 1.9 million annual growth in the population aged 15- to 100- years old, and that the number of households increases by 1.6 million per year. These new households are roughly equally split between homeowners and renters, suggesting robust household growth but more moderate ownership growth.

Population Growth Scenarios

The 2023 Census population projections include four alternate immigration series: a "Main" series, as well as Zero, Low, and High Immigration series. We consider the three non-zero immigration scenarios. This results in three sets of paths for growth in households with the main Census series corresponding to our "mid immigration" household projections.²

Methodology Highlights

• Analysis was based on the householder and ownership status of five-year age and race cohorts for the population aged 15- to 100-years old, with five different race and ethnicity groups (White non-Hispanic, Black non-Hispanic, Hispanic, Asian non-Hispanic, and other non-Hispanic).
• Age and ethnicity-specific population counts are anchored to 2022 ACS levels and grow at the rates implied by the 2023 Census population projections according to the scenarios noted above.
• Age and ethnicity-specific headship and homeownership rates are projected using transition rates based on alternative 10-year lookback periods.³

The three lookback periods we've adopted, based on Decennial Census or ACS data, include:

• 1990-2000 (a moderate headship rate growth and high homeownership rate growth period);
• 2000-2010 (a declining headship and declining homeownership rates period, covering the pre-housing growth boom in the mid-2000s and the initial post-Great Recession bust); and
• 2012-2022 (a high headship and homeownership growth period from the trough of the post-Great Recession decline, corresponding to the last 10 years of available data).

These different lookback periods create three alternate projections: a low-growth (2000-2010 based), a mid-growth (1990–2000 based), and a high-growth (2012-2022 based) projection. We've also created an ownership stress scenario, with a mixed lookback period that uses a moderate headship growth period (1990-2000) for headship transition rates and a low homeownership growth period (2000-2010) for homeownership transition rates.

Outlook

Short-Term
Our current short-term outlook is the "stress" scenario that is based on ownership rate changes during the Great Recession with a mid-immigration population series. While recent immigration data suggests the near-term population growth path is closer to the high-immigration series, the decision to adopt the mid-immigration population series is based on the recent 2023 Census population estimates closely matching the Census's Main population projection series. The reasoning behind the decision to recommend the stress scenario for the short term is that we want to capture recent trends in headship rates but don't believe that recent trends in homeownership rates can accurately capture the current housing market conditions. Namely, the current market has markedly higher mortgage rates and has seen sustained high home prices relative to when the latest 2022 ACS survey was carried out. In addition, Fannie Mae's latest housing forecast indicates these conditions are likely to persist in the near future, supporting our anchoring to the declining homeownership rates lookback period. This leads to a final projected annual growth rate for the 2023-2032 horizon of: 1.89 million for population; 1.60 million for total households; 0.82 million for owner households; and 0.78 million for renter households. This is visible in the red shaded cells in the alternative projections table below.

Long-Term
Our recommendation for a view that is more agnostic to current market conditions and assumes stable growth in both household formation and ownership is to use the mid-range numbers (1990–2000 headship and homeownership transition rates and the mid immigration population series), which we label the "baseline" scenario. This leads to a final projected annual growth rate for the 2023-2032 horizon of: 1.89 million for population; 1.60 million for total households; 1.15 million for owner households; and 0.45 million for renter households. This is visible in the green shaded cells in the alternative projections table below.

The most recent 2023 Census population projections result in noticeably lower annual growth over the next ten years relative to any of the ten-year periods used in our projections. However, our projections result in faster annual growth in the number of households than in any of those periods, but are in line with more recent trends and baseline household counts in the 2022 ACS. Our primary stress scenario sees annual ownership growth slower than either the 1990-2000 or 2012-2022 periods, but above the slow growth during the 2000-2010 period that covers the Great Recession.

In addition to the two outlooks detailed above, below we provide a set of alternative projections for the four different lookback period approaches and three different immigration scenarios for baseline population growth. The table further contrasts these alternative projections to the historically observed growth rates.

ESR calculations from Decennial Census (1990, 2000) and American Community Survey (2010, 2012, 2022) Public Use Microdata samples. Projeced annual growth rates based on ESR cohort model and using 2023 Census Population Projections for population aged 15-100.

For more details regarding the methodology and a detailed breakdown of the stress and baseline projections by race and ethnicity groups, please refer to the Fannie Mae ESR Household Projections 2023-2032 research deck.

Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

¹ The updated population projections should provide a more accurate view of short-term population growth than previous projections based on 2017 population growth estimates. The 2017 projections of population growth over-estimated total actual population growth in the last few years based on ACS population estimates. The 2017 population projections projected a total national population in 2022 of 337.3 million, 1.2% more than the 2022 ACS estimate of 333.3 million. The 2017 population projections overestimated the 2022 prime homebuying population (age 25-40) by 1.8% and the foreign-born population by 4.4%. Net immigration was particularly challenging, as the 2017 projections were not able to account for changing policies in 2016-2021 and the COVID-19 pandemic significantly impacting migration flows.

² Alternative population projections are available from other agencies. For example, both the Congressional Budget Office (CBO) and the Social Security Administration (SSA) provide estimate of US population totals. The most recent projections from CBO and SSA are closer to the high-immigration series in the Census population projections, as they anchor to more recent and higher immigration numbers.

³ The headship rate for a group is the number of household heads in that group divided by the population of that group. Household head is defined as the survey respondent in the Census ACS data. The groups in this analysis are five-year age cohorts by race.