7 states are back above pre-pandemic inventory levels—these 3 states are likely next

When assessing home price momentum, ResiClub believes 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, generally speaking, experienced stronger home price growth over the past 24 months.

National active listings are on the rise (+34% between September 2023 and September 2024); however, we’re still well below pre-pandemic levels (-23% below September 2019).*

September inventory/active listings* total, according to Realtor.com:

September 2017: 1,308,607 📉

September 2018: 1,301,922 📉

September 2019: 1,224,868 📉

September 2020: 749,395 📉 (overheating during the Pandemic Housing Boom)

September 2021: 578,070 📉 (overheating during the Pandemic Housing Boom)

September 2022: 731,496 📈 (mortgage rate shock starts)

September 2023: 702,430 📉

September 2024: 940,980 📈

IF we maintain the current year-over-year pace of inventory growth (+239,594 homes for sale), we'd have...

1,179,530 active inventory come September 2025

1,418,080 active inventory come September 2026

Click here to view an interactive version of the map below

Among the biggest inventory jumps: Florida.

In Florida, the biggest inventory increases initially over the past two years were concentrated in sections of Southwest Florida. In particular, in markets like Cape Coral, Punta Gorda, and Fort Myers, which were hard-hit by Hurricane Ian in September 2022. This combination of increased housing supply for sale—the damaged homes coming up for sale—coupled with strained demand—the result of spiked home prices, spiked mortgage rates, higher insurance premiums, and higher HOAs—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 being that Florida’s condo market is dealing with the after effects of regulation passed following the Surfside condo collapse in 2021.

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, that number grew to seven: Tennessee, Texas, Idaho, Florida, Colorado, Utah, and Arizona. It’s eight states if you count Washington—which was just 35 homes below pre-pandemic levels.

States likely to join that list soon include Oklahoma, Alabama, and Oregon.

Click here to view an interactive of the chart below

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 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?

All the charts above show active listings*, or everything currently for sale. Actives are rising year-over-year because demand has cooled and homes are taking longer to sell—not because there’s a surge in new listings.

In fact, here’s a look at the national chart for new listings**, which remain suppressed due to the lock-in effect that continues to constrain resale turnover. Many homeowners who would otherwise like to sell and buy something else are still opting to stay put to avoid losing their lower mortgage rate/monthly payment.

That said, we did see a noticeable month-over-month pump in U.S. new listings between August 2024 and September 2024. Is that a sign lock-in is easing a little more? We’ll keep an eye on it.

* Active listings (i.e. what ResiClub often calls “inventory”) = “The count of active listings within the specified geography during the specified month. The active listing count tracks the number of for sale properties on the market, excluding pending listings where a pending status is available. This is a snapshot measure of how many active listings can be expected on any given day of the specified month” according to Realtor.com.

** New listings = “The count of new listings added to the market within the specified geography. The new listing count represents a typical week’s worth of new listings in a given month. The new listing count can be multiplied by the number of weeks in a month to produce a monthly new listing count” according to Realtor.com.

6.26% —> Today’s average 30-year fixed mortgage rate as calculated by Mortgage News Daily

Range this year: 6.11% (lowest reading) ←→ 7.52% (highest reading)

243 bps —> Today’s spread between the 10-year Treasury yield and the 30-year fixed mortgage rate

The rate borrowers may qualify for (if eligible) can vary greatly from the daily average published by Mortgage News Daily. Many factors, including credit score, can affect this. ResiClub uses this “average” as a proxy for how the mortgage market is shifting—and how quickly.