Inventory is one of the factors relevant to whether prices are likely to rise or decline, and whether quickly or slowly.
Inventory in Washington State in August 2024 is up 49% from August 2023. Inventory is not up as much in Idaho or Montana, so those states are more likely to see price increases over the next year than Washington State. Inventory is up substantially in Florida. In fact, Florida, Idaho, Tennessee, and Texas have seen inventory increase to pre-pandemic levels.
One of the reasons that Florida inventory is rising include new regulations requiring condo associations to have more reserves, after that Surfside condo collapsed. This means higher HOA fees, with some increases too high for owners to bear. On top of that, flood insurance rates are going up. Increased supply, high HOA fees, high interest rates, and high insurance rates have caused a softening in Florida real estate values. Despite high in-migration, Texas has also seen a softening in its real estate markets, for much the same reasons.
States that will likely soon also return to pre-pandemic levels of inventory include Colorado, Washington, Utah, and Arizona.
Sun Belt and inland northwest real estate markets are returning to pre-pandemic inventory levels quicker than midwest and northeast cities. Friends in the Midwest are surprised when I tell them about softening real estate demand in other parts of the country (e.g., San Francisco and Austin are seeing declining values).
A reason why things are changing more slowly in the midwest and northeast is that many areas in the sun belt and inland northwest experienced higher home price growth during the zoom-boom, work from home, pandemic era during which employers exhibited more flexibility. People moved in and values soon outpriced fundamentals beyond local incomes. Such migration has slowed and interest rates have spiked. Places like Boise, Coeur d’Alene, and Spokane have been affected.
In addition, unlike many sun belt housing markets, many northeast and midwest markets have lower levels of homebuilding. It is much quicker and easier to obtain a building permit in Texas than in New York, for example. Builders have overbuilt in places like Austin and are now offering interest rate buydowns and other incentives to move product. This is cooling the resale market. The northwest doesn’t have those issues, yet, as it takes longer to build and there is less room for new construction.