We have wrote articles before about limited supply of properties in the US but now we can say supply is starting to plunge in some States.
Mortgage rates are causing havoc in the US housing market, the 20 year high is splitting the market. According to realtor.com home inventory fell in 21 of the 51 cities.
The divide seems to be between Northern and Southern States, property in the South tend to be more affordable where Buyers are more willing to enter the housing market which means there are more listings and more inventory available.
In the North your will find larger Metropolitan areas, like New York, Chicago, Cleveland and Baltimore, the higher borrowing costs have stunted many prospective buyers causing local demand to fall. 85% of mortgage holders are locked in to sub-5% mortgage interest rates, which discourages current homeowners from selling their home and buying another at today’s elevated interest rates.The housing market has been the sector hardest hit by aggressive Federal Reserve interest rate hikes that are aimed at quelling high inflation by dampening demand in the economy.
“Dampened affordability remains an issue for interested homebuyers and homeowners seem unwilling to lose their low rate and put their home on the market,” said Sam Khater, chief economist at Freddie Mac, in a press statement. “If this predicament continues to limit supply, it could open up an opportunity for builders to help address the country’s housing shortage.”
Housing supply holding steady at near historic lows has propped up demand compared to other downturns, consequently sustaining higher home prices.“Inventory is approximately 46% below the historical average dating back to 1999,” says Jack Macdowell, chief investment officer and co-founder at Palisades Group.
But going back to the South again the picture looks different, the Southeast market is incredibly active , which holds 18 of the 20 hottest housing markets, according to Bankrate’s Housing Heat Index. Research shows metro areas in Georgia, Tennessee, Florida and North Carolina are at the top of the list of the country’s strongest seller’s markets. Lawrence Yun, chief economist at the National Association of Realtors, sums up the Sun Belt boom this way: “It’s all about job growth and affordability.”
In April 2023, Southeast home prices were up 2.5% compared to last year, selling for a median price of $405K. Miami was the most popular destination among Southeast homebuyers followed by Philadelphia and Boston. 71% of Southeast homebuyers searched to stay within the Southeast metropolitan area.
The Wall Street ran article which sums up the situation very well, we are looking at A Tale of Two Housing Markets, one market stagnant with limited inventory while the other is booming with plenty of inventory, so is the South always sunnier ?
It depends on your reasons for purchasing a property, if you are going to live in the property well then the South seems like the obvious answer, more inventory to choose from a selection of different areas.
But if you are buying the property for an investment the North looks like the better option, limited inventory has pushed up rental demand which has pushed up monthly rental payments. The problem is getting the property in the first instance, in Cities like Cleveland and Detroit properties are being sold within a number of hours not just days.
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