A builder stands in an empty field holding a tablet displaying plans for a new housing development.

The housing market needs 7 million more homes 

A new Realtor.com report found that the housing supply gap has grown considerably over the past decade as household formation has outpaced home construction.

February 28, 2024
3 minutes

Key points:

  • The supply gap is most pronounced for single-family homes, which are 7.2 million shy of what’s needed.
  • The pace of new home starts would need to triple to fill that gap within a 4-5 year period, Realtor.com researchers said.
  • Metros in fast-growing Sunbelt states like Florida and Texas had the widest gaps, with San Antonio topping the list.

New home construction continues at a healthy pace, with over eight months of supply currently available to buyers — but it's still not enough.

According to a new report from Realtor.com on the country's housing supply, the formation of new households is continuing to outpace the delivery of new homes. And in quickly growing Sunbelt states, the gap is even more pronounced.

Millions of new homes missing

Between 2012 and 2023, more than 17 million new households were formed, Realtor.com researcher Hannah Jones writes, while only 9.5 million single-family homes were completed during that same period, leaving a gap of more than 7 million homes. However, when taking new multifamily housing — such as apartments and condos — into consideration, this brought the gap down to just 2.5 million homes.

But it's single-family homes that both first-time buyers and investors are clamoring over. And the size and persistence of the housing gap suggests that demand for single-family homes remains strong. 

"It just creates a tighter, tenser market in general," Jones told Real Estate News. "Even though builders have ramped up production to try and fill some of that gap, we're still seeing new home construction fall short."

According to the latest U.S. Census numbers, January logged a seasonally adjusted annual rate of 661,000 new single-family home sales — up from a year prior — with 456,000 unsold new homes remaining at the end of the month. But according to Jones and Realtor.com, the rate of new home starts would need to triple in order to keep up with the current demand for homes and close the gap within four to five years.

More homes are needed in the Sunbelt states

The gap between new household formations and new home construction is most pronounced in the South, the report finds. According to Jones, the metros with the biggest single-family home gap were San Antonio, Texas; Austin, Texas; and Daytona Beach, Florida. In total, eight of the top ten metros with the biggest gaps were in Texas and Florida.

"Sunbelt metros saw so much demand during the pandemic, which just added fuel to the fire where household growth was so rapid and new construction just couldn't keep up," Jones said. 

While San Antonio tops the list, it's also an outlier for having 15% more inventory today than it did in January 2019, before the pandemic housing frenzy. As prices in other Texas metros have surged, the city has become an attractive market for investors and regular home buyers seeking more affordable options.

"San Antonio has boomed, especially as Austin has gotten so unaffordable," Jones said. "So, in some of these areas where the market dynamics are shifting, there are still opportunities for buyers."

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