Tennessee joins Florida, Idaho, and Texas in the group of markets that have returned to pre-pandemic inventory levels

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Before we get into today’s piece… an important note:

The average 30-year fixed mortgage rate, as tracked by Mortgage News Daily, fell to 6.62% today.

That’s the lowest reading this year, and just a hair above the 52-week low (6.61% on December 27, 2023).

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, 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, 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 (+36.6% between July 2023 and July 2024); however, we’re still well below pre-pandemic levels (-28.7% below July 2019).*

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

July 2017: 1,322,659 📉

July 2018: 1,261,916 📉

July 2019: 1,239,534 📉

July 2020: 822,834 📉 (overheating during the Pandemic Housing Boom)

July 2021: 546,686 📉 (overheating during the Pandemic Housing Boom)

July 2022: 691,652 📈 (mortgage rate shock starts)

July 2023: 647,135 📉

July 2024: 884,273 📈

IF we maintain the current year-over-year pace of inventory growth (+237,138 homes for sale), we'd have...

1,121,411 active inventory come July 2025

1,358,549 active inventory come July 2026

Click here to view an interactive version of the map below

The biggest inventory jump: 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—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

Last month, three states had returned to pre-pandemic 2019 inventory levels: Texas (which first did so in May), Florida, and Idaho.

This month, Tennessee joined that group.

Not too far behind are states like Colorado, Washington, Utah, and Arizona.

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 Boise 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: We’re observing a softening across some 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 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?

* 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.

Later this week, ResiClub PRO members (paid tier) will get a deeper dive looking at inventory changes for over 800 metro areas and 3,000 counties.