Owning a home now feels impossible for young Americans, and 2025 made it worse

The shortage hit a new high

The gap between how many homes America has and how many it needs grew again in 2025. The country now falls about 4.03 million homes short, up from 3.8 million the year before, according to Realtor.com’s 2026 Housing Supply Gap Report. About 1.41 million new households formed last year, but builders only started around 1.36 million units.

That yearly shortfall of roughly 50,000 homes sounds small, but it stacks on top of more than a decade of underbuilding. For young Americans, homeownership is becoming more out of reach.

Builders started fewer homes in 2025

Construction actually slowed down last year. Builders started about 1.36 million housing units in 2025, down slightly from 2024, according to the Census Bureau.

Completions dropped too, falling about 8% from the year before. Single-family starts took the biggest hit, dropping nearly 7% to about 943,000.

Multifamily starts rose about 17%, but that wasn’t enough to make up the difference. Builders kept running into the same walls: zoning rules, permit delays, labor shortages, and rising material costs.

Nearly 2 million young adults can’t move out

About 1.82 million Millennial and Gen Z households are considered “missing,” the highest count in four years. That means those young adults would have started their own households if housing were more affordable.

Compared to the early 2010s, the share of young adults living with their parents is about 2.7 percentage points higher by age group.

High costs and limited supply have pushed back independent living for many Americans under 45. It’s a cycle that feeds on itself.

Buying a starter home takes $86,000 income

A first-time buyer in 2025 needed to earn about $86,000 a year to afford a median-priced starter home, according to Realtor. com.

That’s about $8,000 less than 2024, mostly because mortgage rates came down a bit. But $86,000 is still more than many younger households bring in.

The median down payment hit about $30,400, or about 14% of the purchase price.

At typical savings rates, a household earning the median income would need about seven years just to save that much.

Younger buyers trail their parents’ generation

Gen Z’s homeownership rate ticked up to about 27% in 2025, according to a Redfin analysis of Census data. Millennials edged up to about 55%.

But both groups lag behind where older generations stood at the same ages.

About 38% of 28-year-old Gen Zers owned a home last year, compared to roughly 43% of Gen Xers and 44% of boomers when they were 28.

Among 36-year-old millennials, about 57% owned homes, while Gen Xers and boomers at that age hit 61% and 64%.

Tariffs add billions to building costs

Tariffs on building materials have added an estimated $30 billion to residential construction spending, according to the Brookings Institution’s Tax Policy Center.

The National Association of Home Builders puts the per-home cost at roughly $10,900, though some estimates run higher.

Canadian softwood lumber, which makes up about 85% of U.S. lumber imports, now carries duties of 45% after a tariff took effect in late 2025.

Tariffs on kitchen cabinets and vanities jumped to 50% at the start of 2026. Overall, building material costs have risen about 34% since December 2020.

The South faces the deepest shortage

The South carries the biggest raw housing deficit at about 1.62 million homes, according to the Realtor. com report.

The Northeast follows at about 952,000, then the Midwest at 865,000 and the West at 660,000. But relative to how much has been built since 2012, the Northeast is actually the most squeezed region.

It was also the only region that improved on both its missing-households count and overall supply gap in 2025.

Housing starts there reached their highest level since 2015, but it remains the tightest market by proportion.

Closing the gap takes seven years minimum

Even if builders ramped up construction by 50% above 2025 levels and pent-up demand eased, it would still take about seven years to wipe out the deficit, according to Realtor. com.

At today’s pace, the gap just keeps widening. Last year marked the third-largest annual shortfall since 2012, behind only 2020 and 2023.

The pandemic year produced the single biggest gap, but recent shortfalls point to deeper structural problems. Realtor.

com says closing the deficit means sustained building increases aimed at high-demand areas.

The industry needs half a million workers

The construction industry needs about 499,000 additional workers to meet demand in 2026, according to the Associated Builders and Contractors.

Labor costs are climbing faster than material costs in several trades.

State and local zoning rules and permitting delays keep slowing new projects, and available building lots are hard to find in many hot markets.

Trade groups and economists say immigration enforcement has further shrunk the construction labor pool, making an already tight situation worse.

Renting beats buying in almost every city

Renting is cheaper than buying a starter home in 49 of the 50 largest U.S. metro areas, according to Realtor. com.

That makes rental housing a key path for young adults who want to live on their own but can’t buy yet.

Some young Americans are choosing to rent for flexibility, especially with remote work opening up more options since the pandemic.

Others rent because student debt, car loans, and childcare costs leave little room to save for a down payment. Expanding affordable rental supply could ease the squeeze on household formation.

First-time buyers still have options

FHA loans let qualified borrowers put down as little as 3.5%, well below the 14% median. Many states and cities also run down payment assistance programs.

Some buyers are moving to cheaper markets. Redfin data shows out-of-town home shopping led the way in 87 of the largest U.S. metro areas at the end of 2025.

About 27% of first-time buyers in recent years jumped straight from a family member’s home to owning, skipping renting entirely, according to the National Association of Realtors.

South Carolina, Iowa, and Texas ranked among the most affordable states.

Housing costs loom over 2026 midterms

Housing affordability has become a big political issue heading into the November 2026 midterm elections. Realtor.

com’s Let America Build campaign, launched in 2025, is pushing for zoning reform and faster permitting.

The National Association of Home Builders has met with administration officials and testified before Congress on how tariffs and regulations drive up costs. Several states earned failing grades in Realtor.

com’s affordability report card, including Rhode Island, Massachusetts, New York, California, and Hawaii. Hawaii topped the list with a median home price of about $822,000.

This article was created with AI assistance and human editing.

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