A historically high number of new homes are up for sale in the US South, thanks largely to Florida and Texas.
There were 293,000 newly built houses still on the market in that part of the country in June, topping the previous high of 291,000 set in August 2006, according to new data released this week.
Supply is tight elsewhere in the US as high borrowing costs discourage sellers from listing their properties, and developers race to build more new homes.
The South doesn’t have that problem, especially in Florida and Texas, and that dynamic might provide an advantage to homebuyers in the near future. The glut of new homes may eventually help push down prices, which remain well above pre-pandemic levels.
“There’s a measurable correction already occurring in the market on list prices, but it’s still a fraction of what the appreciation was,” said Nicholas Gerli, founder and CEO of Reventure Consulting, a real estate analysis firm.
PulteGroup CEO Ryan Marshall acknowledged the increased inventory of new and previously owned homes in Florida and Texas, telling analysts this week that orders for new Pulte homes were down 9% in Florida and off 8% in Texas in the company’s second quarter.
“These markets are now in the process of finding the new clearing price needed to work down any excess inventory,” Marshall told analysts.
Read more: Is this a good time to buy a house?
How it happened
So how did this happen in the South, at a time when other regions of the country are struggling to provide enough homes for the people who want them?
It all goes back to the pandemic, when people migrated away from certain pockets of the US. Florida and Texas, in particular, became popular destinations.
Investors and builders followed, ramping up development during a period of mass relocations.
But these states are no longer the draw they once were during the pandemic. That COVID-era migration is waning, even reversing in some metros.
Florida, which had reigned as the most popular move-in state, now ranks third, according to PODS, a moving and storage company. Austin, Texas — a top 20 move-in city during the pandemic — is the No. 5 move-out city this year. South Florida is third.
“You have a little bit of what’s called a boomerang migration occurring where a lot of the people who moved into Texas and Florida during the pandemic are leaving,” Gerli said.
“Some of that’s happening because people are getting called back into the office, other people got laid off — maybe they work in tech. Other people are just moving back to where they came from.”
At the same time, housing investors and pandemic-era buyers that rushed into these markets are selling their properties to capture high prices before they fall further.
And all of that is creating a glut, with existing-home inventory in the South jumping 48.7% year over year in June. That was the biggest increase of any region.
“It’s really all those forces kind of combining at once that’s causing the inventory in Florida and Texas to spike,” said Gerli of Reventure Consulting.
Texas investors looking for an exit
In Texas, some of those looking to sell at the moment appear to be investors.
They are offloading properties at a rate that is higher than the national average and higher than the state’s pre-pandemic norm, according to an analysis from Realtor.com senior economic research analyst Hannah Jones.
So far this year, 13.6% of Texas sellers are investors, higher than the 8.4% average for the state between 2017 and 2019 and higher than the current average of 11.7% for the US.
Jones noted that many of these investors bought even before the pandemic began and have realized significant price appreciation. At the same time, the rental markets in key cities in the state are softening. Those are big reasons to sell now.
“Texas metros like Austin and San Antonio are among the areas seeing the largest year-over-year rent declines,” she said. “Texas investors are seeing falling rents and may be looking to get out before rents fall further.”
They’ve also had to swallow higher property taxes and, in some areas, higher insurance costs because of worsening hurricane trends. That’s made it more expensive to carry the properties.
Florida’s condos
Meanwhile, in Florida, some people who bought during the pandemic are reselling their properties — especially townhomes and condos.
In Florida, 15.8% of July listings were previously listed in 2020 or 2021. That’s higher than the national average of 13.1%, according to Realtor.com’s Jones. Inventory levels for both single-family homes and townhouses and condos are higher than at any time in the past four years.
But for condos and townhomes, it’s decidedly a buyer’s market. It would take 7.4 months to sell all the condo and townhouse supply on the market. A year ago, it was 3.6 months. A balanced market is 6 months.
“Florida condo owners especially are facing added costs since the collapse of that condo building a few years ago,” said National Association of Realtors chief economist Lawrence Yun, referring to the Surfside condo collapse in 2021.
New state regulations this year that were a response to that collapse require condominium associations to regularly appraise the safety of their buildings, often collecting more money for maintenance and repairs as a result.
Add to that higher homeowners insurance premiums as many insurers abandon the state and condo owners “may not be able to pay this extra additional amount, and they have to give it up,” Yun said.
Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
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