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Today’s housing market is one of the strangest that many real estate experts have ever seen. After years of bone-dry inventory and sky-high demand that led to soaring prices, bidding wars, and a breakneck sales pace, the market is correcting—and rapidly at that.
In fact, the number of U.S. homes for sale is rising at the fastest pace in five years, up more than 200% since its lowest point this February, according to a Realtor.com® analysis. That’s great news for frazzled buyers who’ve been struggling over the past few years to find anything—anything—to buy. However, housing supply is still well below normal. The number of listings would need to nearly double to get inventory back to what had become normal before the COVID-19 pandemic—and even that would leave the U.S. with a massive housing shortage.
But it’s not dire everywhere—there are still pockets where supply is rising substantially. And the Realtor.com data team found them. These are the spots where sellers and builders are listing more homes while demand has tapered off, often because budget-conscious buyers are taking a step back as prices and mortgage rates move ever higher. That’s resulting in the remaining buyers in these areas having more options to choose from—and a bit more negotiating power. Sellers in many of these places have even been forced to slash prices to attract buyers.
“These are markets ripe for a correction,” says Ali Wolf, the chief economist at housing research firm Zonda.
“We’ve just experienced a record affordability shock,” she adds, referring to the market volatility over the past two years. “It’s never been stretched so quickly.”
It’s like a rubber band being pulled tight—and then released. The result is more available homes and fewer sales.
Many of the places where inventory is now growing became hot spots during the pandemic. They offered newly remote workers access to natural attractions, sometimes even with cheaper price tags than where these buyers had come from. But prices grew quickly, locking out many local buyers.
Now that mortgage rates have risen and the exodus from the larger, most expensive cities has ebbed, more homes are sitting longer on the market as the number of buyers who can still afford to purchase property has shrunk.
“A lot of [these areas] became overnight successes,” says Wolf. “Most of these are a reasonable commute to larger employment centers … [and they’re] attractive, affordable ‘lifestyle’ markets: beautiful places to live that saw a rapid run-up in demand. They grew too much, too fast.”
Two of the metros were devastated by natural disasters, with inventories rising as homes have been rebuilt and communities restored. In those same areas, long-planned home construction is also coming online, adding to the rebound in supply.
And in at least one city, which became a top destination during the pandemic, the combination of rising home values and the way taxes work are putting pressure on some owners to sell.
To figure out where inventory is rising the fastest, we looked at active listings from July 2021 through July 2022 per 10,000 owner-occupied housing units in the 300 largest metropolitan areas. We included only one metro per state to ensure geographic diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
So, without further ado, let’s take a look at where housing supply is (finally!) on the rise—and why.
1. Some places rebounding from natural disasters saw an increase in homes for sale
Panama City, FL (No. 1), and Lake Charles, LA (No. 6), both experienced hurricanes that have had long-lasting effects on their housing markets—and are at least partly responsible for the rise in homes for sale.
Panama City, situated on the Gulf of Mexico, was hit by Hurricane Michael in 2018. While there are still homes being repaired and resold after the storm, most of the new inventory is from a surge in new construction. Tyndall Air Force Base, just east of Panama City, is undergoing a $4.9 billion rebuild and expansion after being devastated by Michael.
“We’ve had a lot of different projects going up since the storm,” says Josh Mata, the MLS director at the Central Panhandle Association of Realtors®.
The new residential communities can be found throughout Panama City, not just in recovering areas. For instance, Mata says, builders are putting up more homes in master-planned communities such as SweetBay and Breakfast Point, where prices start around $400,000. They’re also creating massive new developments such as a Jimmy Buffet–themed Margaritaville.
And here’s more good news for buyers: The majority of new construction in the past year was priced between $250,000 and $300,00 for three-bed, two-bath or four-bed, two-bath homes spanning between 1,400 and 1,700 square feet, says Mata.
A similar story emerged in Lake Charles. It was hit by Hurricane Laura in August 2020, then a few weeks later in October 2020 by Hurricane Delta. Many of those whose homes were damaged spent the past two years fixing up their properties and fighting with their insurance companies. Now they’re finally putting their houses up for sale.
Investors also bought damaged properties and are now flipping them, adding to the number of homes on the market. And there’s been a lot of growth as more people and jobs migrate to the region.
“A lot of people have left the area, and now they’re selling their properties,” says Latyra Williams, a real estate agent with Century 21 Bono Realty in Lake Charles. “And as more job opportunities and people are moving here, they’re building more homes.”
2. A decline in out-of-state pandemic buyers has given an ‘in’ to local buyers
Many metros on our list became extremely attractive to buyers during the pandemic. White-collar workers—who were suddenly free from the shackles of their cubicles five days a week—left pricey, big cities and headed to places where they could afford larger houses on bigger lots closer to nature. Many sold their homes in expensive states like California and New York and used the proceeds to purchase properties in cash in cheaper metros, pushing up prices and outbidding locals.
But that flood of demand made conditions in these markets unsustainable, and fat-wallet transplants are no longer lined up to make quick purchases. Now, those cautious buyers who had previously been priced out can take more time to shop for a home that fits their budgets. So as homes sit on the market longer, the inventory at any given time has gone up.
Take Reno, NV (No. 4), which sits on the border with California, less than an hour from Lake Tahoe. The area’s known for its easy access to mountains, lakes, and desert recreation. From March 2020 to April 2022, median home list prices in the metro surged about 34%. They’ve since been steadily falling.
“It was that California cash,” says Sarah Scattini, a real estate agent with Re/Max Premier Properties in Reno. “You’d stick a sign in the yard, and almost immediately you’d have multiple offers and then be in contract within five days. We were just jamming.”
But these days, Scattini is telling sellers to expect something closer to 25 days on the market. And with homes lingering longer and prices cooling, more buyers who sat on the sidelines during the frenzied past two years are having a chance to jump in the game, she says.
“I’m seeing more financed buyers and people who were priced out,” Scattini says.
Like Reno, the following metros all offered pandemic buyers with remote work flexibility a chance to get away from urban hubs and closer to the outdoors and the recreation that comes with it: Provo, UT (No. 3), about 45 minutes south of Salt Lake City; Merced, CA (No. 5), about two hours east of the nation's priciest housing market of Silicon Valley's San Jose, CA; Coeur d'Alene, ID (No. 7), a popular vacation destination; Colorado Springs, CO (No. 8), about 75 minutes south of Denver; and Medford, OR (No. 9).
Many of these smaller cities are also cheaper than nearby larger ones or, in the case of Medford, are a more affordable option in the Pacific Northwest. For example, the $1,399,950 median list price in San Jose is three times that of Merced's $445,000 in July, according to Realtor.com data. Prices in Colorado Springs are nearly 23% less than in Denver. And buyers in Provo can score a median-priced home for nearly $25,000 less than in Salt Lake City.
In Colorado Springs, Bobby Landry, the owner of Landry Teams Solutions at Berkshire Hathaway Synergy Group, says things have cooled significantly.
The area was insulated from sharp swings in the market in the past because of the heavy military and tech presence in the area. However, that changed during the height of the pandemic.
“It was a hyper seller's market. We were at eight to 10 days on the market," says Landry. "Now, almost overnight, we’ve moved to an expectation of 60 days to close.”
A similar scenario has emerged in Coeur d’Alene, a welcome change of pace for real estate broker Cindy Sweeney, of Cindy Sweeney Homes. She touted the area's many lakes and opportunities for winter sports in the area.
“Now, after I show a home to a buyer, I don’t have to start writing an offer on my way back to my car,” she says. “I have this one buyer now—I was able to show him 10 homes in two days, and then he was able to take three days to decide which were his top three. There’s no way we would have had that kind of time a few months ago.”
3. Investors pressured by rising values and higher taxes are listing more homes
In Austin, TX, which rounds out our list at No. 10, there's a slightly different story behind the increase in inventory.
First, the state capital—known for its quirky personality and bustling music and tech industries—has been a popular pandemic destination, with companies like Tesla moving into the area in December 2021 and boosting new home construction.
And all that growth has led to a domino effect of sorts.
From March 2020 to May 2022, median home prices soared a meteoric 68%, to $626,500, according to Realtor.com data. (Since then, prices have dropped to a median of $598,000 in July.) Those higher prices meant higher property taxes—which have hit local investors.
“You have a lot of investors here who are dumping their properties because their taxes doubled in the last year or two,” says Brad Pauly, the broker/owner of Pauly Presley Realty in Austin.
Texas is one of nine states that boast no income tax, so a disproportionately large portion of its revenue—relative to other states—comes from property taxes. And, unlike some states where property values are assessed when a home is bought or sold, Texas property values and taxes are recalculated every year.
“There’s been this huge appreciation over the past 24 months,” Pauly says. "The appraisal value for a lot of these properties went up 60%. And if you’re an investor, and you’re working on consistent margins, this puts you in a tight spot.”
Investors have been forced to make a decision: raise rents to account for the increased taxes, or sell their property now and make a significant profit.
“We went from almost negative inventory this time last year to now, what is, let’s call a normal market,” Pauly says.
The post Spoiled for Choice: 10 Cities Where the Number of Homes for Sale Is Dramatically Rising appeared first on Real Estate News & Insights | realtor.com®. best bienes realtor
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