Housing inventory in California and across the Sunbelt has soared to levels not seen in years, raising the prospect of falling prices in a market that remains expensive despite high mortgage rates. Suggests.
The number of active listings in California reached 61,000 in September, the highest level in five years, according to Realtor.com data cited by Nick Ghaly, CEO of Reventure Consulting. This marked a dramatic increase of 41% compared to the previous year.
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Gerli said supply is increasing in areas such as San Diego, Stockton, Modesto and Oxnard.
The situation is similar across the South, where inventories have swelled to 493,000 units, currently just 8% below pre-pandemic levels. The surge spans multiple states, including Florida, Texas, Tennessee and Georgia.
“What’s happening in the South and West is very interesting,” Gerli said on X (formerly Twitter). “Inventories in these two regions are essentially back to normal, and months of supply are now above pre-pandemic levels.”
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When sales volume plummets, inventory piles up. The California Association of Realtors reported that sales in August 2024 were the lowest on record for the month, despite expanding buyers’ options.
This shift is most evident in Florida, where some markets are already seeing price adjustments. Cities like Cape Coral, Lakeland, Tampa and Crestview are on the list. Condominium owners in some of these areas are slashing prices by up to 40% in the face of new state law repair costs, according to the New York Post.
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Adding to market pressures, the average down payment for U.S. home buyers has reached an all-time high of $67,500, according to Redfin. Buyers are typically offering a larger percentage of the purchase price, 18.6% (up from 15% last year), to offset higher mortgage rates.
Real estate data firm Atom has identified more than 50 counties across the country as at risk of a home price collapse. The highest concentrations of vulnerable markets are in California, New Jersey, and Illinois, based on indicators such as underwater mortgages, foreclosures, and unemployment rates.
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“The housing market boom continues to gain momentum. However, some markets are showing signs of potential instability,” said Rob Barber, CEO of Attom.
There are also signs of vulnerability in the New York City metropolitan area. In addition to Kings County (Brooklyn), Richmond County (Staten Island), and the Bronx County, Atom also considers the four suburban counties of Essex, Passaic, Sussex, and Union to be most at risk.
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In California, the possibility of a recession is spreading across the state. Northern counties such as Butte (Chico) and Humboldt (Eureka), central areas such as San Joaquin (Stockton) and Stanislaus (Modesto), and southern areas such as Riverside and San Bernardino are all showing warning signs.
Whether warning signs lead to price corrections in some of the nation’s hottest housing markets could be known in the coming months as inventory continues to rise and sales slump.
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