Published by REALTOR.com | March 10, 2025
The supply gap improved moderately in 2024, but the country still fell 3.8 million units short of meeting demand relative to new household formations and pent-up demand.
The U.S. housing shortage will take more than seven years to fix at the current rate of construction, according to a new report on the housing supply gap from the Realtor.com® economic research team.
Although the supply gap improved moderately in 2024, the country still fell 3.8 million units short of meeting demand relative to new household formations and pent-up demand, the analysis found.
At last year’s construction pace, it would take 7.5 years to close the housing gap and solve a supply shortage that has been the main driver of the housing affordability crisis.
“It is going to take many years to build out of this problem, given the size of the deficit,” says Realtor.com Chief Economist Danielle Hale.
The new analysis found that the supply gap persisted last year even though new home construction outpaced household formations for the first time since 2016, with roughly 1.4 million housing units started.
That’s because household formations were at a nine-year low. At least 1.6 million expected Gen Z and millennial households did not form in 2024 due to various factors, including a lack of affordable housing.
The housing supply gap refers to the difference between new construction and the aggregate demand from both newly formed households and pent-up demand from households that should have formed according to historical trends but did not.
Total demand has outpaced new home construction in each year since 2013, when there were 1 million more new units built than the sum of new households and pent-up demand.
Although the supply gap improved in 2024, it is still the third-largest annual gap since 2012, behind 2020 and 2023.
Regionally, if 2024 trends continue, the South would be able to close the housing supply gap in three years, due to the faster recent pace of new home construction there.
Meanwhile, the West would take 6.5 years to close the gap, the Midwest would take 41 years, and the Northeast would see essentially no improvement.
