What’s Causing the Housing Market Divide?
Housing markets across the U.S. follow their own unique cycles, shaped largely by local supply and demand conditions. Regions that experienced price hikes during the pandemic housing boom are now facing headwinds, while those that lagged behind during this time are now gaining momentum. A recent report from John Burns Research and Consulting shows price trends and sales activity are primarily driven by how well supply aligns with demand.
Markets with too many homes for sale are seeing the biggest price drops
Nationwide, the inventory of resale homes is up by 21% compared with the same time last year, but this varies widely by region. For instance, the Southwest saw a 53% year-over-year increase in the number of resale homes available, while the Midwest saw an increase of just 16%.
Northern Florida and Texas are seeing the largest rise in listings at 38% and 37%, respectively. Areas with an oversupply of homes are experiencing the most pronounced declines in home prices, and this is evident across these states' most populous metros. For instance, Austin has 91% more homes on the market than in 2019, and prices there fell by 2% year-over-year.
Where Americans want to settle has a major impact on a market's long-term success
While current housing dynamics are dominated by supply levels, the long-term success of any market depends on demand. Three major drivers shape the long-term trajectory of housing markets, according to the report, including migration trends, job opportunities, and population growth.
Even with the recent market slowdown, migration to Sun Belt cities remains strong, with fastest growing cities including Charlotte, N.C.; Jacksonville, Fla.;and Raleigh-Durham, N.C. Meanwhile, major coastal cities—such as Los Angeles, New York, and Chicago—are losing the most residents.
Job markets in the South also continue to be the strongest, with Northern Florida and Texas—which saw jobs grow by a respective 1.4% and 1.3% year-over-year—both outpacing the national average of 1.2%. In contrast, Southern California saw flat job growth over the past year, and the Southwest saw a 0.1% year-over-year increase in jobs.
Inventory can make or break the success of a housing market
- 42 Housing Markets With Falling Inventory: Inventory has grown in parts of the U.S., but many areas still have very limited supply. While many Northeastern markets remain tight, much of recent inventory growth has been concentrated in the Sun Belt.
- When Predicting a Housing Slowdown, Inventory Is Key: Inventory is an important marker for predicting which markets are likely to see more affordable home prices.