Realtor.com: U.S. Housing Market Facing a 3.8-Million Home Shortage

AUSTIN, TX—More than a decade of underbuilding has left the U.S. with a shortage of nearly 4 million homes, according to a new analysis from Realtor.com released on May 10. With home prices and rents stretching budgets to their limits, this persistent supply gap is pushing homeownership increasingly out of reach for millions of Americans.

While recent construction gains show progress, they highlight the urgent need for bold policy action. Realtor.com's recent analysis found that in 2024, home completions grew to 1.6 million, the highest level in nearly two decades, driven by an increase in both single- and multi-family construction. For the first time since 2016, new construction activity outpaced household formations. Yet, the nation still faces a supply shortfall of 3.8 million homes—the third-largest annual gap since 2012, trailing only 2020 and 2023. At the 2024 pace, closing the gap would take 7.5 years, with the South catching up in three years, the West in 6.5 years, the Midwest in a staggering 41 years, and the Northeast making little to no progress.

The report stated: “Although the supply gap improved in 2024, it is still the third-largest annual gap since 2012, behind 2020 and 2023. The improvement compared with 2023 (4.3-million home gap) was due to a combination of lower household formations, lower pent-up demand, and higher new-construction activity, especially in the single-family segment. The largest single-year gap in the period of the analysis was in 2020 (an approximately 4.5-million home gap), though it was more of a blip than a trend due to the COVID-19 pandemic.”

Despite more homes being started last year, rising housing costs compounding on top of a lack of availability has kept many young adults from forming new households. Instead, many Millennials and Gen Zers opted to live with family or roommates, leading to an estimated 1.63 million “pent-up” households that didn't materialize in 2024. These households are an important part of understanding the challenge, and contribute to the almost 4 million total housing supply gap, highlighting the unmet demand for homes.

“While builders made strides last year, the scale of the historic housing shortage, paired with strong pent-up demand, meant that new supply couldn't fully close the nearly 4 million-home gap,” said Danielle Hale, chief economist, Realtor.com. “Young households are particularly feeling the strain, as buying a home on an early- to mid-career salary is increasingly out of reach for many. Though a rise in both multi- and single-family construction offered some relief amid low existing inventory, addressing the gap will take sustained effort and smart policy.”

New Construction Overtakes Household Formations;
Costs Sideline Young Households

For the first time since 2016, Realtor.com's report found new home construction outpaced household formations in 2024. Fewer than 1 million new households were formed in 2024—the slowest annual pace since 2016. Meanwhile, 1.36 million homes were started, exceeding household formations by nearly 400,000. Despite overtaking household formations, total housing starts were at their lowest level since 2020, largely from a slowdown in multi-family construction, while single-family housing starts surged to their second-highest level since 2007, as builders ramped up production to address the shortage of existing homes on the market.

Multi-Family Construction Slows Amid Rising Rental Supply

While overall home completions grew last year, multi-family housing starts fell to their lowest level since 2017. After several years of strong multi-family activity, builders pulled back, particularly in high-density developments, responding to an oversupply in the rental market post-pandemic. This is likely foreshadowing a lower pace of new multi-family rental supply that will be completed in the near future. Still, the increase in both single- and multi-family completions helped drive overall inventory gains.

Regional Shifts: South Leads the Way

Housing supply trends varied widely by region. The South saw the most significant improvements in their housing gap in 2024, shrinking by 24.9%; however, it still has the largest gap by volume, with 1.15 million units needed. In the West, decent levels of new construction combined with only modest household formation contributed to the region's progress in narrowing its housing gap by 13.4%. The Midwest saw only modest progress, with a 2.4% reduction in its gap. In contrast, the Northeast was the only region where the housing supply gap widened, growing by 1.2% over the year, with 1.04 million units needed.

To tackle one of the biggest barriers to affordability, Realtor.com is launching “Let America Build,” a national campaign advocating for solutions that expand housing supply. Realtor.com's national Let America Build campaign is advocating for solutions that cut through red tape, restrictive zoning, and outdated regulations that are constricting the ability to build the homes America needs. The initiative calls on lawmakers at every level to make bold, pro-building choices. Realtor.com aims to join forces with some of the biggest industry leaders, including builders, policymakers and housing advocates to push for actionable change that will help create more homes—faster.

“America's housing shortage is holding back economic growth, driving up costs, and making it harder for millions of families to find a home,” said Damian Eales, CEO of Realtor.com. “Through Let America Build, we're rallying the right voices to push for real solutions that will unlock supply and make homeownership more attainable. That's a win for families, communities, and the entire economy—because when housing works, everything works.”