2 Americas: Housing Markets The Great Rebalancing Has Left Behind

The market has undeniably shifted from the extreme seller’s environment of the early pandemic. But in much of the U.S., buyers still face substantial inventory constraints, an Intel analysis shows.

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The U.S. housing market has entered a new era — one in which homebuyers in most parts of the country actually have more negotiating power than they had before the pandemic.

But the market is also deeply divided.

Broad swaths of the nation now provide far more options for buyers than they were used to even a decade ago. At the same time, the other half of the country remains substantially inventory-strapped, a scenario that supports high prices even as buyers and brokerages fight to wrest new listings from competitors.

These two Americas follow distinct geographic patterns, an Intel analysis of Realtor.com data found.

And while much of the nation still faces severe supply challenges, Intel found that others are rebalancing for the wrong reasons — screeching to a halt as new supply remains depressed amid a listless sales environment.

Intel breaks down where the 150 largest metro areas in the U.S. stand on inventory in this week’s report.

Slow to adjust

To an extent, nearly every market has participated in the ongoing transaction downturn, and the Great Rebalancing of housing inventory that has accompanied it.

But while researching this piece, it became clear that the pandemic’s lasting imprint on local markets remains much deeper in some places than others.

Agents throughout much of the South and the West regions of the United States are seeing conditions where the typical buyer’s pleas to bring down prices now hold more weight.

That doesn’t mean these markets are suddenly buyer’s markets by the traditional definition, where it would take six months or longer for the current stock of inventory to sell in its entirety at present sales rates. Even before the pandemic, inventory had been getting relatively tight, pushing most places into firmly seller-market territory.

But those same places are significantly less seller-friendly today, and it’s weakened price growth in some places and brought prices down in others.

For brokerages, this is a double-edged sword. Lower prices directly cut into a broker or agent’s commissions. At the same time, today’s price levels remain unaffordable for many potential buyers at today’s mortgage rates, which puts a significant damper on sales.

On the other side of the country, agents in the Midwest and Northeast are likelier to see conditions that are rebalancing much more slowly.

Many of these markets remain stuck in an overheated situation, a sort of lingering phantom of the pandemic dynamic where razor-thin inventory is still hard to come by, even in the current depleted buyer pool.

Inside the Great Rebalancing

If roughly half the country is undergoing a significant rebalancing toward more buyer-friendly dynamics, what’s driving it?

There are two main answers, Intel found.

The most unusual path is the one taken by Texas and Florida. In these places, new inventory — including new construction and existing listings — is now coming online each month at a rate that rivals or even exceeds pre-pandemic norms.

These states appear to be benefiting from healthier conditions than what’s being seen in other rebalancing markets, including more inbound migration in recent years.

More new listings helps support more new transactions and demand. And while listings are recovering in most parts of the country, Texas and Florida have been at it for longer, and have reached healthier levels sooner.

Using listing outflow as a rough proxy for sales, transaction levels are also much closer to normal levels in many Texas and Florida markets, even as dynamics have shifted in a more buyer-friendly direction.

In the greater Dallas area, listings are moving off the market at levels that are 94 percent of where they were in a typical spring before the pandemic struck. Houston-area listing outflow is back above normal levels, and San Antonio is back right below its pre-pandemic outflow trend.

So in these places, decent sales volume and a buyer-friendly rebalancing have been able to coexist, offsetting the effect of softening prices for brokerages. But that hasn’t been typical of other parts of the rebalancing nation.

Examining San Diego, listing outflow remains stuck at only 58 percent of its typical levels, while new-listing levels are at 67 percent of normal.

The result is typical of many markets along the Pacific Coast and even deeper inland throughout the West: markets where low transaction levels, rather than robust supply growth, are now creating significantly more buyer-friendly conditions — to an extent that may even threaten price stability.

Here’s how some of America’s biggest population centers fit into four major classes of market.

Rebalanced in large part by healthy supply: