According to a new analysis from Realtor.com, this shortfall represents the third-largest annual gap since 2012, trailing only 2020 and 2023.
The persistent supply gap continues to push home prices and rents to budget-stretching levels across the country.
At the current pace of construction, closing the nationwide housing gap would take an estimated 7.5 years, with significant regional variations.
The South could catch up in three years, while the West would need 6.5 years.
The Midwest faces a staggering 41-year timeline, and the Northeast is making virtually no progress.
Danielle Hale, chief economist at Realtor.com, said the situation is now severe.
“While builders made strides last year, the scale of the historic housing shortage, paired with strong pent-up demand, meant that new supply couldn’t fully close the nearly 4 million-home gap,” Ms Hale said.
The housing crunch is particularly affecting younger generations.
Many Millennials and Gen Zers have opted to live with family or roommates rather than form new households, creating an estimated 1.63 million “pent-up” households that didn’t materialise in 2024.
For the first time since 2016, new home construction outpaced household formations last year.
Fewer than 1 million new households were formed in 2024, the slowest annual pace since 2016, while 1.36 million homes were started, exceeding household formations by nearly 400,000.
Single-family housing starts surged to their second-highest level since 2007 as builders ramped up production to address the shortage of existing homes on the market.
However, multi-family housing starts fell to their lowest level since 2017, as builders pulled back on high-density developments in response to an oversupply in the rental market post-pandemic.
Meanwhile, regional trends show varying progress in addressing the housing gap.
The South saw the most significant improvements in 2024, shrinking its housing gap by 24.9 per cent, though it still has the largest gap by volume at 1.15 million units needed.
The West reduced its gap by 13.4 per cent, while the Midwest made only modest progress with a 2.4 per cent reduction.
The Northeast was the only region where the gap widened, growing by 1.2 per cent over the year, with 1.04 million units needed.
