The U.S. housing market is undergoing a significant transformation, creating a clear divide between states where home prices are stabilizing or declining and those where supply remains tight, keeping prices elevated. At Duke Properties, we closely monitor these market shifts to identify opportunities for buyers, sellers, and investors. Understanding where the market is headed can make all the difference when making real estate decisions.
A Market of Contrasts: Oversupply vs. Scarcity
This surge in inventory is largely due to increased home construction. The National Association of Home Builders reported that as of December 2024, there were 118,000 unsold, move-in-ready homes—the highest number since 2009. Florida and Texas account for a significant portion of these new builds. However, with mortgage rates still high, many potential buyers are holding back, leading to homes sitting on the market longer and increasing the likelihood of price reductions.
On the other hand, in states like New Jersey, Pennsylvania, and Illinois, the housing supply remains constrained. Many homeowners in these regions are reluctant to sell due to the so-called “mortgage rate lock-in effect”—having secured historically low mortgage rates in previous years, they are unwilling to trade up and take on higher interest rates. This has left these markets with less than half of their pre-pandemic inventory levels, pushing prices up due to scarcity.
Changing Housing Market: Why This Split is Happening
Several factors contribute to the current housing divide:
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Construction Trends
- Southern states, including Texas and Florida, have benefited from looser zoning laws and lower construction costs, leading to a surge in new housing developments.
- In contrast, places like Illinois and New York face strict regulations, higher building costs, and slower approval processes, limiting new home supply.
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Migration Patterns
- During the pandemic, there was a massive migration to the South, particularly to Florida and Texas, driving up home values. However, as migration slows, demand is weakening in these areas, contributing to a growing surplus of homes.
- Northern states, which did not see the same migration surge, now benefit from more stable demand but limited housing options.
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Affordability and Mortgage Rates
- Mortgage rates remain a crucial factor. In states like Florida, where home values surged 64% over the past five years, affordability has become a significant issue.
- Many buyers are finding that homeownership now consumes up to 44% of their income, making it increasingly difficult to purchase properties at current prices.
What This Means for Buyers, Sellers, and Investors
Given these shifting dynamics, there are key takeaways for anyone involved in the real estate market:
For Buyers: Opportunities in Overbuilt Markets
If you are looking to buy a home or invest, states with rising inventories—such as Texas, Florida, and Colorado—may offer attractive opportunities in the coming months. The excess supply means sellers could be more willing to negotiate, leading to potential price drops if mortgage rates remain high.
For Sellers: Timing is Key
- If you own property in an overbuilt market, consider listing your home sooner rather than later to avoid potential price declines.
- For those in low-supply states like New Jersey or Pennsylvania, prices remain strong, and demand continues to outpace supply. Holding onto properties in these areas could be a wise long-term move.
For Investors: Rental Markets Will See Diverging Trends
- In oversupplied states: Rental prices may stabilize or decrease as more housing becomes available.
- In constrained states: Rental demand is likely to stay strong, with limited home availability keeping rents high.
Duke Properties is dedicated to helping investors navigate these complex market conditions. Whether you are looking to buy, sell, or invest, understanding these regional trends is critical to making informed real estate decisions.
Looking Ahead: What’s Next for the Market?
The future of the housing market will depend on several key factors:
- Interest rates: If rates remain high, markets with surplus inventory may see further price declines as sellers compete for buyers.
- Migration patterns: If demand in Southern states does not pick up again, these markets could shift further in favor of buyers.
- Economic conditions: Job growth and affordability challenges will influence whether homeownership remains attainable for many Americans.
At Duke Properties, we remain committed to identifying real estate opportunities and helping our clients make data-driven decisions. As the market continues to evolve, staying ahead of these trends will be crucial in maximizing real estate investments.
If you are considering buying, selling, or investing, reach out to Albert Dweck and the Duke Properties team to discuss your next steps in this ever-changing market.