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To assess home price momentum, it’s important to monitor active listings and months of supply. If active listings start to rapidly increase as homes remain on the market for longer periods, it may indicate potential future pricing weakness. Conversely, a rapid decline in active listings could suggest a market that is heating up.
Generally speaking, local housing markets where active inventory has returned to pre-pandemic levels have experienced softer home price growth (or outright price declines) over the past 24 months. Conversely, local housing markets where active inventory remains far below pre-pandemic levels have typically experienced stronger home price growth over the past 24 months.
National active listings are on the rise (up 29% between October 2023 and October 2024). This indicates that homebuyers have gained some leverage in many parts of the country over the past year, with some markets even feeling like buyers’ markets on the ground.
However, nationally, we’re still below pre-pandemic active inventory levels (down 21% compared to October 2019), and some resale markets still remain a bit tight.
Here are the historical totals for October housing inventory/active listings, according to Realtor.com:
October 2017: 1,287,322
October 2018: 1,304,682
October 2019: 1,208,311
October 2020: 734,040 (overheating during the pandemic housing boom)
October 2021: 565,707 (overheating during the pandemic housing boom)
October 2022: 752,741 (mortgage rate shock starts)
October 2023: 738,082
October 2024: 953,814
One of the states with the biggest inventory jumps over the past 12 months was Florida.
In Florida, the biggest inventory increases initially over the past two years were concentrated in sections of Southwest Florida. In particular, markets like Cape Coral, Punta Gorda, and Fort Myers, which were hard-hit by Hurricane Ian in September 2022. There was a combination of increased housing supply for sale (with damaged homes coming up for sale) coupled with strained demand (the result of spiked home prices, spiked mortgage rates, higher insurance premiums, and higher HOA fees). That translated into market softening across much of Southwest Florida.
However, the inventory increases in Florida now expands far beyond SWFL. Markets like Jacksonville and Orlando are also above pre-pandemic levels, as are many coastal pockets along Florida’s Atlantic Ocean side.
One reason for this is that Florida’s condo market is dealing with the after effects of regulation passed following the Surfside condo collapse in 2021. This is compounded by a slowdown in work-from-home migration to Florida and significant home insurance shocks.
Click here to view an interactive version of the map below.
In August 2024, only four states had returned to or surpassed pre-pandemic 2019 active inventory levels. In September 2024, it grew to seven states.
In October 2024, that number grew again to eight states: Arizona, Colorado, Florida, Idaho, Oklahoma, Tennessee, Texas, and Utah.
States likely to join that list soon include Alabama, Oregon, and Washington.
Why are Sun Belt and Mountain West markets seeing a faster return to pre-pandemic inventory levels than many Midwest and Northeast markets?
One factor is that some pockets of the Sun Belt and Mountain West experienced even greater home price growth during the pandemic housing boom, which stretched fundamentals too far beyond local incomes. Once pandemic-fueled migration slowed, and rates spiked, it became an issue in places like Colorado Springs and Austin.
Unlike many Sun Belt housing markets, many Northeast and Midwest markets have lower levels of homebuilding. As new supply becomes available in Southwest and Southeast markets, and builders use affordability adjustments like mortgage rate buydowns to move it, it has created a cooling effect in the resale market. The Northeast and Midwest don’t have that same level of new supply, so resale/existing homes are pretty much the only game in town.
Big picture: This year we’ve observed a softening across many housing markets as strained affordability tempers the fervor of a market that was unsustainably hot during the pandemic housing boom. While home prices are falling in some areas around the Gulf, most regional housing markets are still seeing positive year-over-year home price growth. The big question going forward is whether active inventory and months of supply will continue to rise and cause more housing markets to see outright price declines.