This is why Generation Z and Millennials will disappear from the housing market in 2025

the Housing supply gap in the United States It expanded to 4.03 million units New construction It faltered last year, fueling a vicious cycle of displacement that has essentially collapsed Wiping out an entire generation from the market.

Nearly 2 million young potential buyers have found themselves trapped in a state of suspended adulthood, reflecting this Affordability headwinds And other structural obstacles, according to the latest news Supply Gap Report from Realtor.com®.

The researchers found that Housing deficit It continues until 2025 as well building Nearly 50,000 units fell short of demand.

Despite the start of construction of 1.36 million homes, the creation of 1.4 million new families means that the cumulative housing deficit continues to expand.

To calculate Housing supply gapEconomists take into account three components: new home construction, household formation, and pent-up housing Demand for housing.

This gap represents the gap between new construction and aggregate demand from both newly formed households and “lost households”—individuals who, based on historical trends, would have been self-reliant but did not.

“Over the past decade, many families, especially younger ones, have delayed forming due to limited supply and shortages Worsening affordability“, He says Realtor.com Senior Economic Research Analyst Hannah Jones.

“Instead of creating independent families, Many young people stayed with their parentsOr lived with extended family or shared housing with roommates.

Experts estimate pent-up demand for housing by comparing current Millennial and Generation Z headship rates, which measure the share of the population who head their households, with those of people of the same age in 2010-2014.

The delta between 2025 rates and the previous benchmark reveals the amount of pent-up demand: 1.82 million Generation Z and Millennial households that would likely have formed had they not been previously stifled. Shortage of inventory and Worsening affordability.

In other words, there were nearly 2 million fewer households among 18- to 44-year-olds than would be expected if household headship rates had matched those of a decade ago.

“For many early- to mid-career workers, Buying a house At today’s prices and Mortgage rates “These individuals remain out of reach financially,” Jones says. Instead, these individuals continue to live with their parents, other relatives, or roommates.

This reflects the latter result Data from the National Association of REALTORS® Turns out that The average age of first-time buyers rose to 40 last year, A record high.

“For many Millennial and Gen Z families, it’s about affordability and savings,” Nadia Evangelou, NAR’s chief economist, tells Realtor.com.

“High rents make it difficult to save for a Initial paymentstarter homes are often priced well above what early-career income can support. Furthermore, the junior market is very tight, and younger buyers are often competing with repeat buyers who already own shares.

Meanwhile, the proportion of people aged 18-44 living with their parents was 2.7 percentage points higher on average by age than during 2010-2014.

to Housing marketThis translates into fewer young people leasing And bought homes themselves in the past year.

“It’s not that young people don’t want a place of their own,” Evangelo points out. “that it The affordability challenge“.

The missing generation of homebuyers may also have serious implications for overall inventory levels.

“When younger buyers are less active in the market, Older homeowners “They become less likely to sell, which keeps inventory low, especially at entry-level price points,” said Owen Canavan, a broker at Al Mujeza Company LLC“, says Realtor.com.

“Ultimately, this pushes prices up and exacerbates them Affordability issues For future first time buyers.

Tania Jaheim, real estate agent in Keller Williams MarketLas Vegas’ luxury division agrees, explaining that younger households represent a large portion of the natural first-time homebuyer pipeline.

“When they sit on the sidelines, entry-level inventory doesn’t move as quickly, and the higher price levels also slow down because fewer sellers are able to sell and trade,” she tells Realtor.com.

“We’re basically seeing a bottleneck. Demand hasn’t gone away. It’s just been postponed.”

Affordability headwinds are stifling demand

Realtor.com research confirms that the rate of household formation has declined significantly due to affordability constraints. In 2025, the recommended minimum income to buy the average price The beginning of the house It was nearly $86,000, higher than the typical income for people in their 20s and early 30s.

“Even buyers with a solid income have difficulty making down payments, closing costs, and qualifying at today’s prices,” Jaheim says.

“Moreover, many Millennials still carry student loan debt, and Generation Z is entering the market at a time when borrowing standards are more cautious and home prices are higher. The desire is there. But closing the affordability gap is a little trickier.”

Despite recent improvements in affordability, the Average down payment was 14.4%with The average down payment amount totals $30,400.

Evangelo, the NAR economist, suggests a supply mismatch is partly to blame.

“The homes being built and listed are not matching the incomes of younger families, and the shortage is concentrated in the low and middle income ranges — exactly where first-time buyers are looking,” she says.

At today’s savings rates, Realtor.com research has determined that It would take an average-income family seven years to save up for a typical down payment.

“If housing were more plentiful and affordable, some of these individuals would be more likely to form households, increasing annual household formation and reducing the pent-up demand that currently exists in the market,” Jones says.

Regional differences in pent-up demand

Regionally, the South had the highest number of lost Millennial and Gen Z households in 2025, with the Northeast coming in second, despite its smaller population base. This highlights the degree of pressures on affordability and construction shortages in the area.

“For many millennial or younger buyers, or really any buyer for that matter, I would like to see more low down payment options for those with excellent credit,” said Christopher Raad, owner of harvey g. Thunder of brokers in Allentown, Pennsylvania,” says Realtor.com.

“If a buyer shows they have the ability to pay the rent and can maintain a high credit score, they should be rewarded for being responsible while keeping up with their debt and given the opportunity to break into the housing market.”

However, the Northeast was the only US region to see an improvement in both young households lost and the overall supply gap in 2025, helped by housing reaching its highest level since 2015.

Overall, the South had the highest number of new family formations, while the Northeast had the fewest. At the same time, the West saw fewer new families than its Western counterpart MidwestWhich contributed to the widening of the relative gap in the Midwest.