Housing Supply Gap Surpasses 4 Million Homes in 2025 as Construction Fails to Keep Pace With Demand

Rhea-AI Summary

NWS (Realtor.com) reports the U.S. housing supply gap widened to 4.03 million homes in 2025, up from 3.8 million in 2024, driven by underbuilding and persistent demand from younger households.

Key metrics: 1.41 million household formations vs 1.36 million housing starts in 2025; 1.82 million Millennial/Gen Z households remain “missing.” Regional gaps concentrate in the South (1.62M) and Northeast (952K). Under an optimistic 50% construction rise, the deficit would take roughly seven years to close.

Positive

• 1.5M home completions in 2025 (elevated historically)
• Share of new home sales considered affordable rose to 47%

Negative

• Cumulative supply gap reached 4.03M homes in 2025
• Approximately 1.82M Millennial/Gen Z households remain missing
• 2025 housing starts (1.36M) trailed household formation (1.41M)
• Single-family starts fell to ~940,000, lowest since 2019
• Even with +50% construction, gap would take ~7 years to close

Cumulative deficit widens to 4.03 million homes; 1.82 million young households missing amid affordability constraints

AUSTIN, Texas, March 3, 2026 /PRNewswire/ -- The U.S. housing supply gap widened to an estimated 4.03 million homes in 2025, increasing from 3.8 million in 2024, according to the 2026 Housing Supply Gap Report from Realtor.com, as new construction once again fell short of household formation and pent-up demand from younger households persisted.

In 2025, approximately 1.41 million households were formed, compared with 1.36 million housing starts. While the annual shortfall of roughly 50,000 units appears modest, it adds to more than a decade of underbuilding that has constrained supply, fueled home price growth and pushed homeownership further out of reach, particularly for younger Americans.

"Even when annual construction and household formation are roughly balanced, the market is still digging out from more than a decade of underbuilding," said Danielle Hale, chief economist at Realtor.com. "A supply gap exceeding 4 million homes underscores how deeply rooted the shortage has become. Without a sustained and targeted increase in housing supply, particularly in areas with strong job growth and persistent demand, affordability challenges will continue to sideline many would-be buyers."

2025 marks the third-largest annual deficit since 2012, trailing only 2020 and 2023. Although the largest single-year gap occurred in 2020 during pandemic-related disruptions, recent deficits reflect more persistent structural imbalances between supply and demand and the difficulty of making sustained progress against the gap.

Pent-Up Demand From Young Households Intensifies Shortage

The 2026 Supply Gap Report finds that 1.82 million Millennial and Gen Z households were "missing" in 2025, the highest count in 4 years. Among 18- to 44-year-olds, headship rates have declined over the past decade as high housing costs and limited supply have delayed independent living. The share of young adults living with parents was, on average, 2.7 percentage points higher by age than during the 2010–2014 period.

Affordability remains a key barrier. In 2025, the minimum recommended income to purchase a median-priced starter home was approximately $86,000, about $8,000 lower than the prior year, largely due to improved mortgage rates. However, that threshold remains above the earnings of many younger households. The median down payment reached $30,400, representing 14.4% of the purchase price, and it would take a median-income household seven years to save for a typical down payment at today's savings rates.

Year	Yearly HH Formations (Dec - Dec)	Annual Housing Starts	HH vs Starts Deficit	Pent-up 18-44 Households	Deficit with pent- up HH's
2012	973	781	-192	-30	-222
2013	-205	925	938	65	1,003
2014	2,001	1,003	-60	-685	-745
2015	880	1,112	172	-653	-481
2016	771	1,174	574	-834	-260
2017	1,785	1,203	-8	-731	-739
2018	2,293	1,250	-1,051	-1,203	-2,254
2019	1,652	1,290	-1,413	-1,471	-2,884
2020	1,705	1,380	-1,738	-2,709	-4,447
2021	1,636	1,601	-1,773	-2,027	-3,800
2022	2,063	1,553	-2,284	-821	-3,105
2023	1,665	1,420	-2,529	-1,783	-4,312
2024	999	1,367	-2,160	-1,627	-3,790
2025	1,410	1,359	-2,212	-1,816	-4,028

All measured in thousands

Because headship includes both renters and homeowners, expanding affordable rental supply can also help ease constraints. Renting remains more affordable than purchasing a starter home in 49 of the 50 largest U.S. metro areas, reinforcing rental housing as a key pathway to independent household formation.

Regional Gaps Persist, With Northeast Most Constrained Relative to Construction

Housing supply conditions vary significantly by region. The South carries the largest cumulative deficit at 1.62 million homes, followed by the Northeast at 952,000, the Midwest at 865,000 and the West at 660,000.

However, when measured against cumulative construction since 2012, the Northeast faces the most acute shortage, followed by the Midwest, the South and the West. The Northeast was also the only region to see improvement in both its missing young households and overall supply gap in 2025, supported by housing starts reaching their highest level since 2015. Even so, the region remains the most supply-constrained on a relative basis.

Region	2025 HH Formations (Ths.)	2025 Housing Starts (Ths.)	2025 Pent- up Demand (Ths.)	Cumulative Supply Gap (Ths.)	Gap vs. New Construction Since 2012
Northeast	21	136.6	462	952	0.58
Midwest	283	198.3	342	865	0.35
South	736	723.8	743	1,622	0.18
West	229	300	380	660	0.16

Construction Faces Headwinds Despite Elevated Completions

Approximately 1.5 million homes were completed in 2025, a level that remains elevated by historical standards but below 2024's pace. Single-family completions were essentially flat year over year, while multifamily completions declined. Total housing starts were relatively stable overall, though single-family starts fell to roughly 940,000, the lowest level since 2019, while multifamily starts rose to 415,000.

Builders continued to face structural challenges, including zoning restrictions, permitting hurdles, labor shortages and elevated material costs. Although the share of new home sales considered affordable rose from 45% in 2024 to 47% in 2025, and new home prices were steady year over year in the fourth quarter, affordability constraints continue to limit buyer activity.

Even under an optimistic scenario in which construction increases 50% from the 2025 pace and pent-up demand fully dissipates, it would take roughly seven years to eliminate the current deficit.

Meaningfully closing the housing supply gap will require sustained increases in construction and a focus on building in areas where demand is strongest. Expanding access to affordable housing supply remains essential to restoring market balance and ensuring future generations have a realistic pathway to homeownership.

"While construction levels remain elevated compared with historical norms, they are not yet high enough, or targeted enough, to meaningfully close the gap," said Hannah Jones, senior economic research analyst at Realtor.com. "The fact that it would take roughly seven years to eliminate the deficit even under an optimistic building scenario highlights just how significant and persistent this shortage has become."

Combating the U.S. Housing Shortage and Let America Build

Realtor.com^®'s Let America Build campaign continues to spotlight the urgent need to expand housing supply through policy and regulatory reform. Launched at SXSW in 2025, Let America Build advances the national conversation on affordability and new construction barriers, and calls on lawmakers, builders, advocates and communities to remove red tape, modernize zoning and streamline permitting to accelerate construction where it's needed most.

Methodology
To arrive at yearly household formation, the increase in households between December in the previous year and the current year were calculated. This value was used as the number of household formations in the current year. Home starts, completions and permits refer to the total homes metric in the Census construction data, unless specifically referenced as single-family or multi-family, which includes both moderate- (2-4 unit) and high-density (5+ unit) multi-family. HMI and vacancy data were pulled and displayed as stated in the data source.

To calculate pent-up demand, the headship rate was calculated by single-year age using IPUMS CPS data. The 'target' headship by age was set as the 2010 to 2014 average, and the resulting gap was calculated comparing 'target' headship to actual households.

About Realtor.com^®
Realtor.com^® pioneered online real estate and has been at the forefront for over 25 years, connecting buyers, sellers, and renters with trusted insights, professional guidance and powerful tools to help them find their perfect home. Recognized as the No. 1 site trusted by real estate professionals, Realtor.com^® is a valued partner, delivering consumer connections and a robust suite of marketing tools to support business growth. Realtor.com^® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc.

Media contact: Mallory Micetich, press@realtor.com

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SOURCE Realtor.com

FAQ

How large was the U.S. housing supply gap reported for 2025 by NWS (Realtor.com)?

The supply gap was 4.03 million homes in 2025, according to Realtor.com. This reflects cumulative underbuilding since 2012 and a modest 2025 shortfall between formations and starts.

What drove the 2025 housing shortfall reported by NWS and how big was the annual gap?

Annual underbuilding was about 50,000 homes in 2025, according to Realtor.com. That gap (1.41M formations vs 1.36M starts) adds to a decade-long cumulative deficit now totaling 4.03M homes.

How many younger households were 'missing' in 2025 per NWS (Realtor.com)?

About 1.82 million Millennial and Gen Z households were missing in 2025, according to Realtor.com. Headship rates for ages 18–44 remain below 2010–2014 averages, intensifying pent-up demand.

Which U.S. region had the largest cumulative housing deficit in 2025, per NWS?

The South carried the largest cumulative deficit at 1.62 million homes, according to Realtor.com. The Northeast was most constrained relative to construction despite some 2025 improvement.

What does Realtor.com say about construction capacity to close the 2025 gap?

Even with construction rising 50% from 2025 levels, it would take roughly seven years to erase the deficit, according to Realtor.com. Structural barriers limit faster progress.

Did affordability improve in 2025 and what are typical buyer barriers noted by NWS?

Affordability modestly improved: the starter-home income threshold fell to about $86,000, and affordable new-home share rose to 47%, according to Realtor.com. High down payments, zoning, permits, and labor costs remain barriers.