👋👋 Good morning real estate watchers! Today, we are going to talk about how researchers found that a 10% increase in home prices leads to a 1% decrease in births among non-homeowners. So basically, expensive housing is nature's birth control, which explains why San Francisco has both the highest real estate prices AND the lowest birth rates. It's not that people don't want kids, it's just that after paying rent, they can barely afford to feed themselves, let alone create tiny humans who will demand organic everything and college funds.

But first, here’s what we’ve been paying attention to this week…

1️⃣ Lease It or Leave It: As mortgage rates stay stubbornly high and buyers stay on the sidelines, frustrated home sellers are becoming “accidental landlords,” converting unsold listings into rentals. This surprise surge in mom-and-pop rentals is squeezing institutional landlords in hot Sun Belt markets. (CNBC)

2️⃣ Disaster Debt Detox: A new Senate bill proposes giving natural disaster survivors six months of penalty-free mortgage relief on federally backed loans, with the option to extend. Backed by Senators from California and Colorado, the bill aims to ease the financial burden as climate-fueled disasters like wildfires and floods leave families struggling to rebuild. (NBC)

3️⃣ Rate Escape: Mortgage rates just dropped to a 10-month low of 6.57%, giving serious buyers a rare window of affordability amid economic uncertainty. With the market reeling from a weak July jobs report, house hunters may want to pounce before this opportunity disappears faster than a well-priced listing. (MarketWatch)

4️⃣ Hammer Time Halted: Construction added just 2,000 jobs in July as overall spending dropped 0.4% in June, with private residential and nonresidential sectors pulling back sharply. Amid rising tariffs and labor uncertainty, builders are hitting pause, deferring or canceling projects. (AGC)

5️⃣ Brew City Boom: While much of the U.S. housing market is cooling, Milwaukee is on fire, home sales are up 12%, prices up 8.2%, and sellers are snagging more than asking. Meanwhile, Sun Belt cities like Las Vegas are slipping fast as rising inventory puts the chill on once-scorching markets. (Redfin)

TOP STORY

When Elon Musk warned that "humanity is dying" due to falling birth rates, he wasn't just making headlines; he was telegraphing a demographic shift that could transform America's housing market in ways most investors haven't even considered yet.

The world's richest man, and the same person who thought 'X Æ A-XII' was a reasonable thing to call a human child, is now our fertility guru. This growing "pronatalist" movement believes that "modern culture has failed to adequately prioritize the value of nuclear families and making lots of babies." While critics dismiss this as Silicon Valley's latest obsession, the movement's push for larger families could create unexpected ripple effects across suburban real estate markets – and savvy investors are starting to take notice.

The data backing pronatalists' concerns is stark: only 1.62 children were born on average per woman in 2023, well below the replacement rate of 2.1.

But here's where it gets interesting for housing markets: There's compelling research showing that real estate prices and birth rates are more connected than most people realize.

A landmark study by economists Lisa Dettling and Melissa Kearney found that "a 10 percent increase in home prices leads to a 1 percent decrease in births among non-homeowners in an average metropolitan area." Even more intriguingly, "the negative effect among non-owners is offset by a 4.5 percent increase in births among current homeowners, who are now wealthier."

The researchers concluded that "changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates," making housing costs potentially more important than job security when couples decide whether to have children.

The pronatalism movement isn't just about individual choices; it's increasingly driving policy discussions that could reshape housing demand. According to demographer Lyman Stone, now leading the Institute for Family Studies' new Pronatalism Initiative, "a foremost priority of the Pronatalism Initiative will be to formulate solutions to the housing crisis. Housing costs are a tremendous obstacle to family life, absorbing precious resources that should go to rearing children."

The Trump administration has shown interest in pronatalist policies, with the president reportedly soliciting suggestions to boost births from married couples. Meanwhile, figures like JD Vance have proposed "more than doubling the child tax credit to $5,000 a child," policies that could significantly boost purchasing power for young families.

If pronatalism gains political traction, the real estate implications become clear: families need space. "According to fourth quarter 2024 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was 2,205 square feet, the highest reading since mid-2023."

The trend toward larger homes isn't accidental. "American Home Shield explains that as Americans move to the suburbs, the number of residents in each home falls. In contrast, the average single-family home size has increased. In 1949, a new single-family home averaged 909 square feet, but by 2021, that average had grown to 2,480 square feet."

Build-to-rent communities are capitalizing on this shift. "A record 93,000 BTR single-family homes were completed in 2023, a 39% increase from 2022," with many targeting families who want suburban amenities without homeownership commitments.

For real estate investors, the pronatalism movement presents both opportunities and cautionary tales. Markets with family-friendly policies and affordable housing relative to income could see increased demand from couples embracing larger families.

Research from the Institute for Family Studies found that "places with faster home price increases had a faster decline in birth rates," suggesting that markets pricing out young families could face demographic headwinds.

Conversely, areas that maintain affordability while offering family amenities like good schools, parks, and suburban layouts could benefit from any policy-driven boost to family formation.

While it remains unclear whether the pronatalism movement will translate into actual policy changes or cultural shifts, the underlying economics are already reshaping housing preferences.

For investors watching demographic trends, the message is clear: bet on markets that make it easier, not harder, for families to grow. Whether Musk's baby fever spreads or fizzles, the fundamental relationship between housing costs and family formation isn't going anywhere, and smart money follows the strollers.

The pronatalism movement may be Silicon Valley's latest cause célèbre, but its impact on your portfolio could be very real.