The U.S. housing market is experiencing a stark divide, with homebuyers in some states snagging deals and others facing fierce competition. This contrasts with previous market recoveries, where conditions were more uniform nationwide. The National Association of Realtors reports that the inventory of homes for sale in January was 16% below 2018 levels. This scarcity is partly due to homeowners holding onto low mortgage rates, fearing higher costs if they move. However, life circumstances are forcing some to sell, gradually increasing supply.
Regional disparities are pronounced, with Texas, Florida, and Colorado having surpluses of homes for sale, while the Northeast and Midwest face shortages. Texas, for example, has 20% more homes listed than pre-pandemic levels. In contrast, 15 states, including New Jersey and Pennsylvania, have less than half their typical inventory. Builders focused on the South, leading to a surplus, especially in Florida, where housing stock has grown 15% since 2020.
The mismatch between supply and demand is exacerbated by high mortgage rates deterring buyers and slowing sales. Southern states, with more recent home sales, have a higher percentage of mortgages above 6%, but some homeowners there own their homes outright and can sell without worrying about new loans. In contrast, stricter regulations and high construction costs in states like Illinois limit new projects and keep supply tight.
Home prices have surged in Sunbelt states like Florida, with median values rising 64% in five years, compared to more modest increases in Illinois and New York. However, affordability issues in Florida, including high insurance costs and housing expenses consuming 44% of income, are cooling demand. Migration to these states is slowing, reducing the high-end buyers who previously supported prices.
For buyers, Texas and other oversupplied states may offer bargains if rates remain high and inventory grows. Sellers in these areas might face price drops. Conversely, the Northeast and Midwest, with limited inventory, are likely to see stable or rising prices, making it harder for buyers to find deals without competition.
Overall, the housing market’s regional differences highlight how local factors like supply, affordability, and migration trends shape opportunities and challenges for buyers and sellers.
