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.”
With housing sales slowing in so many parts of the country, the fact the supply gap has increased so much is indeed surprising.
It is indeed a unique market. In NJ we see an overall slowdown due to a woeful lack of supply and year over year price increases that challenge what buyers can afford. Less homes to buy plus less buyers that can afford them = slowing sales.
I suspect you’ll see an improvement in those numbers in the next couple years now that they have closed up the borders.
I find this information to be very interesting. Once that the Lenders kick in on forbearance, short sales, foreclosure, the builders have filed for bankruptcy, the class action lawsuits kick in, auctions begin for foreclosures west to east, things will get better quick. IMO
The Rochester, NY market is still very strongly a Seller’s Market. I wrote a Cash offer more than $120,000 over the assessed value this week and didn’t get it. There were 44 offers. Keep in mind that the tax rate in the suburbs around Rochester ranges from $32-$50 per $1000 of assessed value. Meaning…a $300,000 house in some areas will have property taxes of $15,000 per year! Obviously some school systems have more buyers than other, thus higher prices…this market is brutal for buyers.
Writing an offer based on a county’s assessed value is not the best approach, especially for Realtors who have access to more current sales information than an assessed value that might have been developed several years ago.