The housing supply gap reached an estimated 4.03 million homes in 2025, increasing from 3.8 million in 2024, according to a new data report from Realtor.com.
Last year saw the formation of approximately 1.41 million households, compared with 1.36 million housing starts. Realtor.com noted that although the annual shortfall of roughly 50,000 units might seem mild, it added to over a decade of underbuilding – resulting in a tight inventory and accelerated home price growth.
Housing supply conditions varied by region in 2025. The South carried the largest cumulative deficit 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 added that 2025 was the third-largest annual deficit since 2012, trailing only the pandemic-impacted 2020 market and 2023.
“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. “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.”
