HousingWireHousingWire
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 that was released Monday. This supply gap, which is stretching budgets for home purchases and rental units, is pushing homeownership increasingly out of reach.
In a preview of the company’s 2025 Housing Supply Gap report, Realtor.com chief economist Danielle Hale shed light on the current pulse of housing vacancies.
“Over the last decade or so, we have seen both homeowner and rental vacancy rates drop to record lows,” she said last week. “The homeowner vacancy rate should be closer to 1.5% or 2%, and it’s still just barely above 1%. The rental vacancy rate should be in the mid-7% range, and it’s struggled just to get back to right outside of that 7% range.”
The company’s analysis found that in 2024, home completions grew to 1.6 million, the highest level in nearly two decades. This was driven by an increase in both single-family and multifamily construction. Importantly, new construction activity outpaced household formations for the first time since 2016.
But as Hale pointed out, the U.S. still faces a supply shortfall of 3.8 million homes — the third-largest gap for any year since 2012, trailing only 2020 and 2023.
At 2024’s 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 South saw the most significant improvements in its housing gap in 2024, shrinking by 24.9%. But it still has the largest gap by volume with 1.15 million units needed. The gap in the West narrowed by 13.4% and the Midwest saw a modest reduction of 2.4%
The Northeast was the only region where the gap widened, growing by 1.2% during the year, and 1.04 million units are needed there.
“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,” Hale said.
“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.”
Construction highlights
Even though new construction activity outpaced household formations for the first time since 2016, fewer than 1 million new households were formed in 2024. Realtor.com revealed that 1.36 million homes were started, exceeding household formations by nearly 400,000.
But total housing starts were still at their lowest level since 2020, largely from a slowdown in multifamily construction, which fell to its lowest level since 2017.
“In the early part of the 2010s, we did see an elevated share of multifamily building,” Hale said. “We’ve now gone back to a level that is closer to 25% of what’s being built is multifamily, and the other 75% is single-family.”
Despite more homes being started last year, rising housing costs led many millennials and Gen Zers to opt to live with family or roommates. In turn, this created an estimated 1.63 million “pent-up” households that didn’t materialize in 2024.
“As we drill in and look at the homeownership rate for those under 35 and for those 35 to 44, those homeownership rates have dropped,” Hale explained. “So that is a symptom of the lack of affordability that we see from this underbuilding in the housing market.”
Pushing policy solutions
The preview also tackled the urgency for policy action in the homebuilding sector. As a potential solution, Realtor.com announced its launch of “Let America Build,” a national campaign advocating for solutions that expand housing supply.
The campaign is described as “advocating for solutions that cut through red tape, restrictive zoning and outdated regulations that are constricting the ability to build the homes America needs.” It calls on lawmakers at every level to make pro-building choices.
“America’s housing shortage is holding back economic growth, driving up costs, and making it harder for millions of families to find a home,” Realtor.com CEO Damian Eales said in a statement.
“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.”
