Discover Which States Are Facing Falling Home Prices – Is Yours on the List?

The US housing market is looking quite different depending on where you are. In some places, buyers are making great deals, while in others, they are caught in bidding wars. There’s no simple picture here; your location really matters in how the market behaves.

Across the country, the number of homes for sale is still lower than usual. According to the National Association of Realtors, the inventory of existing homes was 16% lower this January than five years ago.

Why is this happening? Many homeowners are holding onto their low mortgage rates, afraid to sell and face today’s higher rates. However, life changes are pushing some people to move, which is slowly increasing the number of available homes.

When you look closer, the situation varies greatly. In Texas, for instance, there are many homes for sale—about 20% more than before the pandemic. Other states like Florida and Colorado are experiencing similar surpluses.

On the flip side, the Northeast and Midwest are struggling. In 15 states, including New Jersey and Pennsylvania, the number of homes is less than half of what it used to be.

What’s causing this divide? Builders have been busy in the South. In December, the National Association of Home Builders reported 118,000 move-in-ready homes, the largest number since 2009. Florida and Texas have seen significant growth, with Florida’s housing stock increasing by 15% since 2020, according to Brad O’Connor, chief economist at Florida Realtors.

But buyers aren’t jumping at these new options. High mortgage rates mean many of these homes are sitting unsold. In contrast, states like Illinois struggle with strict regulations and high construction costs, leaving little chance for new homes to be built.

Even though many homeowners want to move in places like Illinois, the tight supply and high prices often keep them from making a move. Jeff Baker, the head of Illinois Realtors, points out that the market is pretty stuck.

Another issue is the mortgage lock-in effect. In the South, around 21% of mortgages were above 6% by the third quarter of last year, compared to 18% in the Northeast. This is because more homes have been sold in the South since interest rates rose. Plus, Southern homeowners are often more likely to own their homes outright, which makes it easier for them to sell without needing a new mortgage.

However, homes in Sunbelt states like Florida have seen sharp price increases, with median home values rising by 64% in five years, according to Redfin. In contrast, Illinois and New York saw much smaller gains of 42% and 17%, respectively.

But the market in Florida is shifting. High insurance costs are driving homeownership costs up to 44% of local incomes, compared to 28% in 2019. As migration slows, the wealthy buyers who have been keeping prices high are becoming fewer.

This could mean good news for potential buyers in Texas and similar areas. If interest rates don’t change, prices may drop significantly. However, in the Northeast and Midwest, limited inventory will likely keep prices steady.

Check out this related article: How Trump’s Tariffs Could Slash North American Auto Production by One-Third: What It Means for You

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