Has an entire generation been erased from the housing market? A new report from Realtor.com revealed that likely has happened.
According to Realtor.com, the U.S. housing supply gap widened to 4.03 million units as new construction faltered last year. It fueled a cycle of displacement that has essentially erased an entire generation from the market.
The latest supply gap report from Realtor.com noted that almost 2 million young would-be buyers found themselves trapped in a state of suspended adulthood that reflect affordability headwinds and other structural hurdles.
Realtor.com noted that researchers found that the housing deficit persisted through 2025 as construction fell nearly 50,000 units short of demand. And, despite 1.36 million housing starts, the creation of 1.4 million new households meant that the cumulative housing deficit continued to widen, Realtor.com said.
How is the housing supply gap calculated?
Economists factor in three components: new-home construction, household formations, and pent-up housing demand, Realtor.com noted. That gap represents the divide between new construction and the total demand from both newly formed families and “missing households.”
Many People Didn’t Strike Out on Their Own
Those are individuals who, based on historical trends, would have struck out on their own but did not, Realtor.com said.
“Over the past decade, many households, particularly younger ones, have delayed forming due to limited supply and worsening affordability,” Realtor.com Senior Economic Research Analyst Hannah Jones. “Rather than establishing independent households, many young adults have remained with parents, lived with extended family, or shared housing with roommates.”
Realtor.com noted that experts estimate pent-up housing demand by comparing current millennial and Gen Z headship rates, which measure the share of a population that heads its own household, with those of similarly aged people in 2010–14.
It said that the delta between 2025 rates and the earlier benchmark reveals the scale of suppressed demand: The 1.82 million Gen Z and millennial households that likely would have formed had they not been stifled by inventory shortages and worsening affordability.
In other words, there were almost 2 million fewer households among 18- to 44-year-olds than would be expected if headship rates matched those from a decade ago.
“For many early-career to midcareer workers, purchasing a home at today’s prices and mortgage rates remains financially out of reach,” Jones said. Those people instead remain living with parents, other relatives, or roommates.
This finding reflects recent data from the National Association of Realtors showing that the median age of first-time buyers rose to 40 last year, which is a record high.
Affordability and Savings
“For many millennials and Gen Z households, it comes down to affordability and savings,” Nadia Evangelou, Principal Economist at NAR, told Realtor.com. “High rents make it hard to save for a down payment, and starter homes are often priced well above what early-career incomes can support. On top of that, the entry-level market is very tight, and younger buyers are often competing with repeat buyers who already have equity.”
Coincidentally, the share of 18- to 44-year-olds living with their parents was, on average, 2.7 percentage points higher by age than during 2010–14.
According to Realtor.com, that translated into fewer young people renting and purchasing homes on their own last year.
“It’s not that young adults don’t want their own place,” Evangelou said. “It’s an affordability challenge.”
The co-called missing generation of homebuyers also could have serious implications for overall inventory levels.
“When younger buyers are less active in the market, older homeowners become less likely to sell, which keeps inventory low, especially at entry-level price points,” Owen Canavan, Affiliate Broker with Miracle LLC, told Realtor.com. “Ultimately, this pushes prices higher and exacerbates affordability issues for future first-time buyers.”
Realtor.com said that research confirms that the household formation rate plummeted in large part because of affordability constraints. In 2025, the minimum recommended income to buy a median-priced starter home was roughly $86,000, which was higher than the typical income for people in their 20s and early 30s.
“Even buyers who earn solid incomes are struggling with down payments, closing costs, and qualifying at today’s rates,” Jhayem said. “On top of that, many millennials are still carrying student loan debt, and Gen Z is entering the market at a time when borrowing standards are more cautious and housing prices are more elevated. The desire is there. It’s just a little tougher to bridge the affordability gap.”
Despite recent affordability improvements, the average down payment was 14.4%, with the median down payment amount totaling $30,400.
NAP Economist Evangelou said that a supply mismatch is partly to blame.
“The homes being built and listed are not aligned with the incomes of younger households, and the shortage is concentrated in low- and middle-income ranges—exactly where first-time buyers are looking,” she says.
South has Most Missing Millennial, Gen Z Households
At today’s savings rates, Realtor.com said its research showed that it would take the median-income household seven years to save up for a typical down payment.
Regionally, Realtor.com said that the South had the largest number of missing millennial and Gen Z households in 2025, with the Northeast in second place, despite its smaller population base.
That highlights the degree of affordability pressures and underbuilding in the region.
“For many millennial or younger buyers, or really any buyer for that matter, I would love to see more lower down payment options for those with excellent credit,” Christopher Raad, Owner of Harvey Z. Raad Realtors in Allentown, Pennsylvania, told Realtor.com. “If a buyer shows that they have the ability to pay for a rent payment and can keep a high credit score, they should be rewarded for being responsible while keeping up with their debts and have an opportunity to break into the housing market.”
The Northeast was the only region to see improvement in both missing young households and the overall supply gap in 2025, supported by housing starts reaching their highest level since 2015.
Overall, Realtor.com noted that the South recorded the largest number of new household formations and the Northeast the fewest. The West saw fewer new households than the Midwest, contributing to a widening relative gap in the Midwest.
