Births, Aging, and Migration: How Demographics and Demand Drive Growth in the US Housing Price

The real price of housing in the US increased 60.4% from 1980 to 2019. Over this same period, the population grew 45%, and its composition changed as birth rates fell, people lived longer, and migration patterns shifted. I quantify the effects of these demographic changes on the real price of housing in a dynamic, general equilibrium model. I adapt a standard, state-of-the-art incomplete markets model to include time-varying demographics, which I calibrate to exactly match a series of empirical population measures from 1980 to 2019. The model indicates that demographic changes can account for 49.6% of the measured increase in the real price of housing. The effects of demographic change in the model are born mostly by younger households: in 2019, older households achieve a similar standard of living as older households in 1980, while younger households own and consume less than their 1980 counterparts. Using counterfactual demographic evolutions, I separately quantify the effects of changes in three demographic channels—births, aging, and migration—since 1980. Holding births constant at their 1980 level, I find that the real price of housing rises an additional 10.2 percentage points; counterfactuals with constant aging and migration processes produce less price growth than the baseline.