Rising inventory hasn't put much competitive pressure on builders yet—except in Texas and Florida

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The longstanding view among most housing analysts is that homebuilders compete against resale inventory—something that, during the Pandemic Housing Boom, fell to historic lows as the market overheated.

In the current environment, active housing inventory is finally on the rise in most markets. It isn’t happening because of a flood of listings—new listings are still quite low. Instead, strained housing affordability has slumped housing demand, and homes are taking longer to sell. Thus active inventory is building.

So how much competitive pressure is rising resale housing inventory putting on homebuilders? To find out, ResiClub reached out to Zonda this week to get their latest builder survey.

According to U.S. homebuilders surveyed by Zonda in July 2024:

• 56% are seeing “very little competition” from the resale market

• 27% are seeing “a little competition” from the resale market

• 14% are seeing “moderate competition” from the resale market

• 1% are seeing “strong competition” from the resale market

• 1% are seeing “very strong competition” from the resale market

On a nationally aggregated basis, U.S. active inventory being up +37% year-over-year hasn’t yet created a lot of competitive pressure for builders.

“In spite of all the blur and the affordability and the noise and the inventory and everything in the media, underneath that, people want to be homeowners, and so we’re seeing that,” KB Home CEO Jeffrey Mezger told ResiClub in July. “We sold 5.5 homes a month per community [last quarter]—it’s one of the highest levels in the company’s history.”

The biggest exceptions for homebuilders are Florida and Texas, where active inventory has risen the most.

In Florida and Texas, that pressure is starting to raise eyebrows and slow some builders’ sales. (Click here to see the June 2024 survey result, and here for the May 2024 survey result).

The fact that Florida and Texas homebuilders are seeing more competition from resale makes sense. After all, many Florida and Texas markets are where inventory has jumped above pre-pandemic 2019 levels.

ResiClub PRO members can find an interactive version of the map below in this article.

One factor is that some pockets of Texas and Florida 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 Punta Gorda and Austin. Property tax and home insurance hikes only added to the affordability pressure.

Later this week, ResiClub PRO members will get a deeper dive looking at recent home prices changes for over 800 metro areas and 3,000 counties.