While there may be attempts to manipulate BLS and CPI data by the government to conceal the impact of 5.5% interest rates potentially plunging the country into a severe recession, independent data on the real estate market indicates a long-standing inventory shortage that is starting to show signs of improvement.
A recent study from Construction Coverage has identified the areas in the U.S. experiencing the largest increases in housing inventory.
The report highlights that the current housing shortage, estimated to be between four to seven million homes, has roots that stretch back well before the COVID-19 crisis. Following the Great Recession, the U.S. saw a decrease in new home construction over a decade, marking the lowest construction rate since the 1960s.
The report emphasizes that certain regions are more severely impacted by the housing shortage than others. The study ranks locations based on the percentage change in average monthly housing inventory between Q1 2023 and Q1 2024.
Nationally, the U.S. witnessed a decline in housing inventory from over two million in 2012 to a low of around 630,000 at the beginning of 2022.
During the same period, the months’ supply metric, indicating how long existing inventory would take to sell without new listings, dropped from a high of 7.5 months to a historic low of 1.1 months.
The report also mentions that housing inventory has slightly rebounded since early 2022, with around 970,000 homes for sale nationally in the first quarter of 2024, reflecting a 4.0% year-over-year increase.
Despite this improvement, the current inventory would only sustain the sales pace for 2.9 months, a slight increase from the previous year’s 2.8 months’ supply.
The report analyzes trends at the city and state levels, revealing that as of Q1 2024, states with the lowest supply levels are primarily in the Midwest and Northeast, such as Kansas (1.5 months) and Rhode Island (1.8 months) respectively. Washington also stands out with only 1.9 months of supply.
In contrast, several Southern states, including Florida (5.2 months), Hawaii (5.2 months), and Montana (5.1 months), offer more favorable conditions for prospective buyers.
Among major cities, Denver, El Paso, and Dallas have seen significant year-over-year increases in housing inventory, while Las Vegas, Raleigh, and Chicago experienced declines.
Although the data does not suggest a collapse akin to 2008, it is a noteworthy shift. The housing market, being vast, tends to correct gradually rather than swiftly. However, the increase in inventory combined with mortgage rates exceeding 7% could indicate a potential price correction by 2025.