Housing Shortage in the United States Leads to High Prices, but there are Two States Facing Surplus
The housing shortage in the United States has led to persistently high prices, causing many potential buyers to hesitate. However, the situation is quite the opposite in two states where housing oversupply has resulted in stagnant or declining prices.
According to a report released by online real estate brokerage firm Redfin on April 25th, the housing markets in Florida and Texas are at a standstill due to a significant increase in housing supply, coupled with a decrease in demand shifting away from these regions.
Both Florida and Texas have been constructing a large number of homes, thus limiting the growth of housing prices. In March, the number of homes for sale in Cape Coral and North Port in Florida increased by around 50% compared to the same period last year, exceeding any other region in the country. In McAllen, Texas, the supply surged by 25%.
These two states have constructed more homes than anywhere else in the country, competing to make space for new immigrants in the era of the COVID-19 pandemic. However, as the immigration wave recedes, homes are now lingering on the market, causing price growth to stagnate. On Florida’s west coast, due to the surge in housing supply, sellers are lowering prices, and the time needed to sell a home is increasing. Similar situations are also emerging in certain areas of Texas.
“Just two years ago, the North Port metropolitan area was one of the most competitive housing markets in the country because remote workers could afford it, and there was a shortage of homes for sale. But that is no longer the case today,” said local Redfin sales manager Eric Auciello in the report.
The Redfin report shows that among the top 10 cities with the largest year-over-year increases in supply nationwide, six are in Florida and two are in Texas. Cape Coral, Florida, saw the largest increase in homes for sale (51%), followed by North Sarasota Port in Florida (48%), Fort Lauderdale, Florida (30%), Tampa, Florida (29%), McAllen, Texas (25%), Orlando, Florida (23%), Knoxville, Tennessee (23%), Dallas, Texas (20%), West Palm Beach, Florida (20%), and Cincinnati, Ohio (17%).
Among the top 10 cities where sellers are most likely to lower their listing prices, five are in Florida and two are in Texas. In North Sarasota Port, 48% of listings have been discounted, the highest percentage nationally. Following are Tampa (44%), Indianapolis (43%), Cape Coral, Florida (41%), Denver, Colorado (37%), Orlando, Florida (35%).
“Out-of-state homebuyers no longer see Florida as the place to get astounding home values,” Auciello said. “Now they are moving to North Carolina or Tennessee for better deals. Meanwhile, many local blue-collar workers are unable to afford homes due to high prices.”
The increasingly severe insurance crisis in Florida has compounded the state’s challenges, with a Redfin survey showing that nearly three-quarters of homeowners noted an increase in insurance costs or changes in coverage.
Home insurance has become a growing concern in the national real estate market, as worsening climate risks have increased costs for insurance providers. A study by climate risk research and technology company First Street in September last year estimated that housing values may plummet significantly due to rising premiums and loss of coverage in certain areas.
“We are at a turning point,” Auciello said. “For wealthy buyers, the hefty insurance costs are not always a big issue, but for those on a tighter budget looking to purchase coastal homes, it could be a real challenge.”
Nationwide, as mortgage rates remain relatively high, the number of new listings in March slowed down compared to the same period last year, leading to price increases.
Redfin stated that nationwide, due to high mortgage rates, the number of new listings in March declined by 6% compared to the previous month, marking the largest drop since January 2022.
The total number of active listings (i.e., homes for sale) increased by 1% from February, marking the smallest seasonal gain since August but a 4% increase compared to the same period last year, the largest annual increase in 12 months.
Prices continue to rise, partly due to the ongoing shortage of homes for sale. The median sales price of homes in the United States in March rose by 5% year-over-year to $420,357, only 3% below the historical peak of $432,496 reached in May 2022.
After seasonally adjusting, home sales volumes remained relatively stable compared to a month ago but decreased by 3% year-over-year.
The average 30-year fixed mortgage rate in March was 6.82%, the highest level since December. The Federal Reserve warned that rising inflation could delay their planned interest rate cuts this year.