Surprise: when housing supply meets demand, prices stabilize
Though a housing shortage amid rising demand continues to push prices up in most of the country, some cities in Florida and Texas are seeing housing prices fall. How? They’ve built a lot more housing, The Wall Street Journal reports.
In most of the U.S., the limited number of homes for sale is pushing prices back toward record highs. Sale prices for single-family existing homes rose in 93% of U.S. metro areas during the first quarter, according to the National Association of Realtors. The median single-family existing-home price grew 5% from a year ago to $389,400.
Yet the market is cooling and prices have started falling in some cities in Florida and Texas, where robust home-building activity in recent years has helped boost the number of homes for sale. The two states accounted for more than a quarter of all single-family residential building permits every year from 2019 to 2023, according to Census Bureau data.
In 10 Texas and Florida metro areas, the inventory of homes for sale in April exceeded typical prepandemic levels for this time of year, according to Realtor.com. In eight of those markets, pending sales in April fell from a year earlier.
In Florida and Texas, “we’re starting to get into a buyer’s market,” said Rick Palacios Jr., director of research at John Burns Research & Consulting.
Only five of the 50 biggest markets posted year-over-year price declines in March, according to data provider Intercontinental Exchange, and four of them were in Texas or Florida: Austin, Texas; North Port, Fla.; Cape Coral, Fla.; and San Antonio.
In Portsmouth and Manchester, where new rental construction has accelerated in recent years, bringing thousands of new units onto the market, prices remain stubbornly high. Some policymakers and observers have suggested that this disproves the idea that adding more supply will lower prices. It does not. New Hampshire’s supply remains tens of thousands of units short of demand. For prices to stabilize, supply will have to approach demand, which will take decades at the current pace of construction.
Stabilizing home prices by letting the market bring supply in line with demand cannot be done overnight. It’s a years-long process. But Florida and Texas show that it can be done.
