Home completions are at the highest levels in almost 20 years. And yet there was a gap of 3.7 million homes between the demand and supply of housing, leaving hundreds of thousands – especially younger Americans -- out in the cold.
           
According to a study by Realtor.com, the shortage in housing is partly due to a factor it calls “the headship rate” – the rate at which the population forms households. It has fallen for the 18-44 year age group for more than 10 years. “By comparing today’s millennial and Gen Z headship rates to those of similarly aged Americans in the early to mid-2010s, we can estimate “pent-up” housing demand and paint a more complete picture of the housing supply gap,” the study said.
           
In 2014, there were 685,000 households in the 18-44 year age group with pent-up demand; the total shortage for all households was 745,000. By 2024, there were 1.63 million households in this millennial-Gen Z age group experiencing pent-up demand, while the total housing deficit stood at 3.7 million.
           
The inadequate supply of housing occurred even though 1.36 million homes began construction in 2024, including the second-highest level of single-family housing since 2007. However, multifamily starts – especially in the high-density segment – fell to their lowest level in seven years. That brought total housing starts to their lowest level since 2020. Homeowner vacancy stood at 1.1% in 4Q 2024, well below the historic norm.

Cost is a primary factor contributing to the housing gap. To purchase a starter home at today’s prices and mortgage rates, the minimum recommended income would be about $94,000 – a level well above what younger households would likely earn, the report found. For some, renting may be the answer. “It remains more affordable to rent than to buy a starter home in 48 of the 50 largest U.S. metro areas,” the report noted.

Despite the high number of new apartments, the report noted that there has been no significant drop in rents in much of the country as more households have been forced to lease.