Housing construction has faced a plethora of challenges in recent years, as the country falls further behind in the number of homes needed to meet demand. The latest data from Realtor.com® has found these challenges once again widened the “housing supply gap,” with the future looking uncertain without “meaningful” policy changes.
Realtor.com’s 2026 Housing Supply Gap Report found that this gap grew to 4.03 million homes in 2025, up from the 3.8 million seen by the end of 2024. The report noted that this is the third-largest annual deficit since 2012, trailing only 2020 and 2023.
Despite not a large disparity between household formation (1.41 million formed in 2025) and housing starts (1.36 million in 2025), Realtor.com Chief Economist Danielle Hale said that “the market is still digging out from more than a decade of underbuilding.”
“A supply gap exceeding 4 million homes underscores how deeply rooted the shortage has become,” she continued. “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 noted that a large contributor to the shortage is pent-up demand from younger households, namely that of millennial and Gen Z households (age 18 to 44). Realtor.com found that 1.82 million millennial and Gen Z households were “missing” in 2025—the highest count in four years. Generational living has continued to trend up, as the share of young adults living with parents was about 2.7 percentage points higher by age than during the 2010-2014 period.
This is due to continued affordability challenges. Data from Realtor.com shows that the median income required to buy a starter home in 2025 was $86,000, well above the average $33,696 to $69,264 median income for 18- to 44-year-olds reported by Forbes. The average median down payment reached $30,400 in 2025, which also outweighs incomes for millennials and Gen Zers, and would take about seven years to save for.
Deficits in housing supply also continued to vary regionally.
The South has the largest gap at 1.62 million homes, followed by the Northeast at 952,000, the Midwest at 865,000 and the West at 660,000. Realtor.com noted, however, when measured against cumulative construction since 2012, the Northeast actually faces the largest shortage, followed by the Midwest, the South and the West.
The path ahead
Construction has seen an improvement, picking up overall in 2025 and making an effort to close the gaps. New Residential Construction data from the Census Bureau saw 1.5 million homes completed in 2025, which despite being below 2024’s 1.63 million, was still elevated by historical standards.
However, Hannah Jones—senior economic research analyst at Realtor.com—said that construction levels “are not yet high enough, or targeted enough, to meaningfully close the gap.”
“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,” she continued.
In order to “meaningfully close the gap,” experts across real estate have noted that changes must be made to regulations in order to help builders combat the challenges they’ve been facing.
“A lack of construction labor, elevated land costs and often wide-ranging local regulations will continue to make it challenging to build new housing, particularly housing at lower price points,” Bright MLS Chief Economist Lisa Sturtevant previously explained.
Recent focus has been on the Housing for the 21st Century Act (H.R. 6644), which passed the House of Representative back in February and is currently on the floor and up for a vote in the Senate. The bill aims to increase housing supply in the U.S. through removing certain building and lending regulations, as well as adjusting certain programs overseen by the Department of Housing and Urban Development.
In response to President Trump’s recent State of the Union, National Association of Realtors® (NAR) Chief Advocacy Officer Shannon McGahn said that boosting inventory, “streamlining” regulations and supporting “responsible” development “are all essential components of addressing housing affordability.”
“NAR encourages the Senate to consider the recently House-passed Housing for the 21st Century Act,” McGahn said. “Lawmakers can help ensure that the promise of homeownership remains achievable for current and future generations of Americans.”
Realtor.com also called into focus its own campaign, Let America Build, created by the portal to spotlight the urgent need to expand housing supply through policy and regulatory reform.
