Housing Supply Gap Surpasses 4 Million Homes, Realtor.com Finds
(Illustration: Gustavo Rezende via Pixabay)
The U.S. housing supply gap widened to an estimated 4.03 million homes last year, increasing from 3.8 million in 2024, according to the 2026 Housing Supply Gap Report from Realtor.com.
The report noted new construction once again fell short of household formation and pent-up demand from younger households persisted.
Approximately 1.41 million households were formed in 2025, compared with 1.36 million housing starts. While the annual shortfall of roughly 50,000 units may appear 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 four million homes underscores how deeply rooted the shortage has become.”
Hale noted that without a sustained 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 marked 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,” the report said.
Pent-Up Demand From Young Households Intensifies Shortage
The 2026 Supply Gap Report found that 1.82 million Millennial and Gen Z households were “missing” in 2025, the highest count in four years. Among 18- to 44-year-olds, headship rates–the proportion of the adult population that heads a household–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,” the report said. “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.”
