Housing Inventory Rises, Price Growth Slows

The U.S. housing market is undergoing a significant shift, driven by rising interest rates and a pullback in remote work. During the pandemic boom, demand surged, fueled by low borrowing costs and expanded work-from-home capabilities, pushing home prices up by an estimated 43% between March 2020 and June 2022.

As demand has cooled and mortgage rates have climbed, homes are selling at a slower pace, contributing to a rise in available inventory. This has led to a deceleration in national year-over-year home price growth, now hovering around 1.0%, which is below the pace of U.S. income growth. Markets that experienced the most significant price increases during the boom, particularly former "boomtowns," are now seeing price corrections.

The increase in housing supply is not uniform across the country. While inventory in the Northeast and Midwest remains below pre-pandemic levels, many areas in the Mountain West and Gulf Coast regions have seen substantial inventory recovery. Generally, markets where inventory has returned to or surpassed 2019 levels have experienced weaker price growth or declines over the past four years.

Builders are also responding to the changing market, with increased new construction in some areas, particularly the Sunbelt. Price adjustments and incentives on new homes can influence the resale market, further contributing to the broader cooling of home price appreciation and smoothing out the market after the pandemic-induced overheating.