The housing supply gap expanded in the United States last year, driven by continued underbuilding, new industry data shows.
The gap hit an estimated 4.03 million homes, an increase from 3.8 million in 2024, according to the 2026 Housing Supply Gap Report from Realtor.com. This marked the third-largest annual deficit since 2012, behind 2020 and 2023, and suggests many areas
Roughly 1.41 million households were formed in 2025, less than the 1.36 million housing starts. While 50,000 may seem relatively insignificant, it contributed to more than a decade of underbuilding that has constrained supply, boosted home-price growth and made homeownership less achievable, especially for younger Americans, the report said.
"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, in a press release Tuesday. "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."
The report found that 1.82 million Millennial and Gen Z households were "missing" last year, the most in four years, and among 18- to 44-year-olds, headship rates have decreased over the past decade due to high housing costs and limited supply.
The share of young adults living with their parents was also 2.7 percentage points higher than during the 2010-2014 period, the report showed.
Affordability
While younger potential homebuyers search for options, older homeowners have stayed put. The typical homeowner remained in their house for 12 years in 2025, the longest median tenure since 2022, Redfin reported.
That was nearly twice as long as the early 2000s, as the typical homeowner tenure was 6.5 years in 2005, for example. But over the next decade, people lived in their homes longer as the population grew older. Baby boomers and Gen Xers who bought in the past and have stayed in place have been incentivized to do so, as they either owned their homes outright or had smaller mortgage payments than current first-time homebuyers, Redfin said.
"High mortgage rates and home prices perpetuate a cycle that locks up housing inventory," said Chen Zhao, Redfin's head of economics research, in a press release Tuesday. "It can keep existing homeowners in place and financially discourage them from moving to a different home or a different neighborhood, which drives prices up even higher for first-timers trying to break into the market."
