Over the course of 2018, factors impacting supply and demand for housing in the U.S. trended negatively, causing a shift away from prior expectations of a steady and strong growth environment in residential new construction. Wells Fargo Securities and L.E.K. Consulting analyze these factors, among others, against historical housing activity to assess the potential impact of a near-term housing down-cycle. We put into context current residential new construction activity relative to long-term averages and quantify the level of pent-up demand in household formation, most notably from the millennial generation. Our view of the data suggests a positive outlook despite current fears of near-term softness.