Across the country, millions of households are cost-burdened, spending far too much of their income just to keep a roof over their heads. Here’s the critical insight: homes today average over $420,000, which puts them out of reach for many first-time buyers and renters. The core issue driving this crisis is a chronic shortage of affordable housing units, and the homes being built often fail to meet the needs of those who need them most.
In the video and narrative below, we’ll break down why affordability keeps slipping away and will continue to get worse, with a close look at under-building and the trend toward larger, more expensive new construction. Stick around, because I’ll share data-driven insights you won’t see elsewhere, and by the end, you’ll understand why this crisis is not going away and how you should proceed.
Let’s start by looking at how the housing market works—and why existing home sellers do not significantly impact the supply.
Why the Housing Market is Just One Big Pool
When we talk about the housing market, it’s important to see it as a single, interconnected system—one big pool of shelter that includes every home, whether rented or owned. Every time someone moves out of one home and into another, the total number of places to live stays exactly the same. No matter how many times homes are bought or sold, it’s just a reshuffling of the same set of keys. This is what economists call a net-zero effect: for every household that moves in, another moves out, and the overall supply doesn’t budge.
A helpful way to picture this is with the bathtub analogy. Imagine the housing market as a giant tub filled with all the homes in the country. When a home is built, it’s like turning on the faucet—fresh water fills the tub, and the total supply goes up by one. But when a home is demolished, destroyed by disaster, or converted to another use, it’s like pulling the drain. Each year, about 400,000 to 550,000 homes vanish through demolition, disaster, or conversion. That’s a steady outflow you can’t ignore, and it means that even just to keep the water level steady, new homes have to be added at a matching pace.
Resales, on the other hand, are just stirring the water. They let people move to new neighborhoods or into homes that fit their needs better, but the total amount of water in the tub doesn’t change. No matter how quickly homes are bought and sold, the number of available units stays the same unless new homes are actually built. That’s why, if new construction stalls or falls behind, the market tightens. The drain keeps working, but the faucet slows to a trickle.
This is more than just a metaphor—it’s a real numbers game, and the stakes are high. If the pace of new construction doesn’t at least keep up with the number of homes lost each year, the overall housing stock shrinks. That puts more pressure on everyone looking for a place to live, driving up competition and prices. And remember, those annual losses are just the baseline. As the population grows and more households form, the need for new supply gets even greater.
The takeaway is clear: resales alone can’t solve a shortage. Many analysts warning of a “surging” housing supply focus only on resales. But every time an existing home changes hands, the seller turns right around and needs another place—either buying again or becoming a renter—so the overall inventory hardly budges. True relief comes only from building fresh homes that add to the total stock. With that in mind, let’s dig into the hard numbers behind the construction shortfall.
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The Great Construction Slowdown: Where Did All the Homes Go?
Examining the numbers, the scale of the construction slowdown becomes apparent. During the forty years from 1970 through 2009, U.S. builders averaged about 1.7 million new housing units each year—a pace that kept up with population growth and replaced the 400,000 to 550,000 homes lost annually to demolition, disaster, or conversion. This steady rate meant that, for decades, the housing supply could keep pace with the formation of new households and the aging of existing units. But starting in 2010, everything shifted.
Over the last 15 years, builders completed only about 1.2 million homes per year. That’s at least half a million homes short of what was needed each year, and the deficit grew steadily.
Between 2010 and 2024, this shortfall resulted in a multi-million-unit gap. Put simply, we built fewer houses than new households, so the gap kept widening. Each year, we fell behind, the market tightened, and competition for available homes increased. This shortage fuels fierce competition, driving prices up and excluding first-time buyers. For many, the prospect of owning a home or even finding an affordable rental slipped further out of reach.
What caused this construction slowdown? After 2009, builders faced tighter financing and labor constraints, which slowed starts for over a decade. The pace of new home construction never fully recovered, and the deficit continued to compound year after year. Even today, we’re still operating below the historical average, which means the gap hasn’t had a chance to close. To stabilize the market and meet the needs of a growing population, the U.S. would need to increase annual housing production by over half a million units above the recent average and maintain that pace for decades just to erase the backlog.
If the construction rate stays stuck at current levels, the market can’t catch up. As a result, prices and rents keep rising, and affordable options become even more scarce. The pressure is felt on all sides: buyers face bidding wars, renters see higher costs, and anyone looking for a starter home finds slim pickings. The longer this deficit persists, the deeper the affordability crisis gets, and the harder it becomes for new households to find a place to live.
If you live in an area where the population is declining, you are likely seeing home prices fall, and you think I must be crazy. However, the people leaving your market area are relocating to other places and witnessing prices rise. The US housing shortage is real, and the only way to fix it is to build more affordable housing.
Chronic under-building isn’t just a numbers problem—it’s a structural imbalance that grows worse over time. The market is still feeling the effects of years when construction lagged far behind demand. Without a major and sustained increase in building, the cycle of rising prices and limited options will continue.
But more homes alone aren’t enough—what they build matters. Next, I’ll discuss why today’s new homes often miss the mark for affordability.
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Building Big, Selling High: Why New Homes Miss the Mark
The shift in new home construction over the past generation has fundamentally changed who can afford to buy or rent. Builders have shifted their focus from producing smaller, entry-level homes to larger, higher-priced properties.
Just twenty years ago, nearly half of new homes fell into the “starter” category—compact, affordable, and accessible for first-time buyers. Today, that share has dropped to only about 18%, with most new single-family homes measuring well over 2,100 square feet. In 2024, the median new single-family home size reached 2,162 square feet, while even new rental apartments now average more than 1,000 square feet. The result is that smaller, less expensive homes have become rare in new construction, pushing many entry-level buyers and renters out of the market.
The price gap has only grown wider. In 2000, the median new-home price was $170,000, compared to a median household income of $42,100. By the end of 2024, the median new-home price had soared to $423,000, while the median household income reached $80,600. Over that same period, the price-to-income ratio jumped from about 4.0 to 5.3, meaning home prices have grown much faster than earnings. For households hoping to buy their first home, this widening gap has made ownership less and less attainable.
This isn’t just about bigger homes being more expensive at the point of sale. Larger properties cost more to maintain, heat, cool, and insure. For families with limited budgets, these ongoing expenses add up quickly. When builders focus on larger, pricier homes, it doesn’t just leave out entry-level buyers—it also drives up competition for the limited supply of smaller, more affordable existing homes and rentals. This increased demand for a shrinking pool of affordable options pushes prices even higher, making it harder for moderate-income households to find a place to live.
A significant part of why this trend persists is due to NIMBYism, local zoning, and development rules. Strict lot sizes and minimum square-foot requirements make it nearly impossible to build small, affordable homes in many areas. Impact fees and regulations often push builders toward larger, more expensive projects, since the costs of compliance and development are easier to absorb on higher-priced homes. That means first-time buyers and moderate-income renters simply have fewer new options. Builders respond to these incentives by prioritizing bigger homes with luxury features, because that’s where the profit margins are best. The result is a market that systematically underproduces the kinds of homes most needed by people just starting out or working within a budget.
Even if overall construction were to ramp up, the mix of what’s being built matters just as much as the total number. Without more affordable, appropriately sized homes, the housing crisis will persist for millions of people. The current approach leaves too many households locked out, with little chance to access new housing that fits their needs or budgets.
So, how do we reset production and product mix? Let’s wrap up with the roadmap for real change.
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The Three Pillars Of The Home Affordability Crisis
Remember our three pillars: one unified market, a half-million-home annual shortfall, and an affordability mismatch in new builds. Addressing these challenges starts with concrete steps. Zoning reform is crucial—allowing duplexes, missing-middle housing, and factory-built homes on standard lots can open up more affordable options in neighborhoods that have been closed off to anything but single-family homes. These changes enable the addition of diverse housing types that cater to a broader range of needs and incomes.
Incentives matter, too. Tax credits or density bonuses can motivate developers to prioritize affordable and entry-level housing over luxury builds. Combining zoning reform with smart incentives can help close the gap and make housing more accessible to a broader range of people.
Now that you understand the crisis, should you buy a home now or wait until 2026 and hope for better prices? I answer this question in the video on the right side of your screen. Check it out and leave me a comment letting me know you saw this video too.
