Homebuyers and sellers in the South and West are facing a new reality
Home sales in once-flourishing US Sun Belt regions are experiencing a noticeable slowdown, with properties remaining on the market for extended periods. This shift marks a new reality for areas that previously saw rapid transactions and fierce bidding wars.
A growing inventory of unsold homes is emerging as a defining characteristic of these markets, marking a departure from the low-supply conditions that have prevailed since the 2008 financial crisis.
According to Bloomberg, real estate agents in the South and Southwest report a surge in home listings, driven by homeowners abandoning expectations of near-term mortgage rate decreases. In Florida, escalating insurance costs are prompting sales, while in Colorado, investors are divesting rental properties.
This influx of homes has significantly lengthened the selling periods. For example, houses in Florida now take a median of 73 days to sell, a significant increase from 55 days two years prior, and twice as long as properties in New Jersey and Virginia, according to data from Realtor.com.
“In the big picture, it’s not horrible, but compared to what everyone was used to, it feels like molasses,” said Michael Lauer, a broker in Florida’s Tampa Bay area, where sales have dipped 14% and supply has more than doubled in two years.
Nationally, while the supply of pre-owned homes remains below 2019 levels, nine states across the South and West now exceed those benchmarks, noted Bloomberg Intelligence analyst Drew Reading. Homebuilders in the Sun Belt, who ramped up production during the pandemic-era boom, are now offering price cuts and concessions to move excess inventory.
Market “normalization” and seller challenges
Economists are referring to this buildup of unsold houses as “normalization.” Charlie Dougherty, a senior economist at Wells Fargo & Co., observed, “Inventories have been climbing, but they’ve been climbing out of a hole.”
Despite US home prices generally remaining higher than a year ago, cities like Dallas and Tampa are experiencing declines, according to S&P CoreLogic Case-Shiller data.
In Fort Worth, Texas, homeowners are increasingly listing properties, realizing that mortgage rates are unlikely to return to the exceptionally low levels seen previously. Though over 70% of owners nationwide had mortgage rates below 5% in the first quarter, some are compelled to sell due to job relocations or family needs.
Contributing to the supply, particularly in Colorado, are tenant-friendly laws that have led frustrated investors, mostly mom-and-pop landlords, to sell rental properties. In the Tampa Bay area, rising flood and homeowners’ insurance costs are also pushing people to sell. The era of immediate multiple offers on listed homes, Lauer stated, “That’s long gone.”
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