The United States housing market is deeply divided between inventory-rich areas and extreme shortage zones. Mortgage expert Jennifer Beeston explains how to navigate this split market to get the best deal.
As a mortgage lender licensed in forty-eight states, my team and I have a unique perspective because we actually do business across the entire country. While national news outlets love to throw every market into one giant bucket to calculate a misleading average, the truth is that American real estate is currently a tale of two very different markets. Some regions are experiencing a massive surge in inventory, while others remain desperately locked down with almost nothing for sale. Understanding your local market dynamics is the single most important step to making a smart financial move.
In several pockets of the country, buyers suddenly have plenty of options to choose from. When I look at the data, cities like Houston, Austin, Phoenix, and parts of South Carolina and North Carolina stand out as heavily inventory-rich. This shift is being driven by three main factors: post-pandemic builder oversupply, cooling speculative investment, and a natural correction from the extreme frothiness of the 2020 through 2022 market.
New construction is a major driver of this inventory surge. During the height of the pandemic housing boom, dozens of builders rushed into markets like Texas at the same time. They started construction when interest rates were sitting at two or three percent, but completed those homes just as rates climbed to six and seven percent. Selling a home in a higher-rate environment is a completely different game, and many of these properties are now sitting empty.
To keep their base prices artificially high, many builders are offering massive concessions rather than dropping the list price. For example, a builder might list a home for five hundred thousand dollars but offer one hundred thousand dollars in incentives or rate buy-downs. Unfortunately, this makes things incredibly difficult for regular homeowners trying to sell their houses nearby, as they cannot compete with those massive corporate incentives.
If you are shopping for new construction in an inventory-rich area, do not settle for the advertised incentives. If a builder's website says they are offering ten thousand dollars, ask for more. There are likely several other builders down the street who are desperate for your business. I always advise my clients to negotiate aggressively and ask for the moon, even if it makes the builders a little uncomfortable.
During the peak years of 2020 through 2022, markets like Austin became dangerously frothy. I remember talking to a client who was buying a seven hundred thousand dollar house that had been worth five hundred thousand dollars just a year prior. The seller wanted him to waive all contingencies, bypass inspections, and guarantee an extra fifty thousand dollars in cash if the appraisal came in low.
My advice on this is simple: unless you plan to stay in a home for ten years or more, do not pay tens of thousands of dollars over the appraised value. If you buy a house for far more than it is worth and waive your home inspection, you are taking an immense financial risk. The market eventually corrects, and you do not want to be the one forced to sell a home for five hundred thousand dollars that you bought for six hundred thousand dollars.
Speculation has also heavily impacted inventory levels. When interest rates were incredibly low, both institutional and mom-and-pop investors snapped up properties in places like Southern Florida, assuming home values and rents would rise forever. Now that property taxes and insurance rates have spiked, many of these speculative investments no longer cash flow, forcing investors to sell. Similarly, inexperienced fix-and-flip investors who bought houses to put lipstick on a pig are now struggling to find buyers at higher interest rates.
Meanwhile, on the opposite end of the spectrum, we have markets with an absolute lack of inventory. This is highly visible along the East Coast in states like New York and New Jersey, as well as in coastal California and cities like Seattle. In these areas, homeowners who locked in two or three percent mortgage rates during the pandemic have zero incentive to sell. I even have a property in California myself with an incredibly low rate that I am keeping because it is appreciating more than the interest rate every year. Unless homeowners are facing a major life change like a divorce or a cross-country relocation, they are holding onto those low rates and turning their properties into rentals rather than selling.
If you are lucky enough to be shopping in a high-inventory market, utilize real estate professionals who know how to negotiate like sharks. I work with fantastic agents across the country, like Sahar in Houston, Michelle in Dallas, and Doreen and Shelby in South Carolina, who know how to ask the seller for price drops, closing cost credits, and rate buy-downs. You have the leverage, so do not be afraid to use it.
If you want to quickly diagnose your own local market, there is an easy trick you can use on Zillow. Simply filter your search to your target price point, such as six hundred thousand to seven hundred thousand dollars, and look at the map. If you see a massive sea of red dots clustered together, you are in an inventory-rich market. If you see fewer than ten homes available, you are in an inventory shortage market, which means you will have to fight a bit harder to win a home, though these high-demand areas also tend to appreciate more over the long term.
Real estate is not a single national story; it is a highly localized puzzle. The national media's broad averages will not help you buy a home in San Francisco, where you can barely buy a one-bedroom apartment for the national median home price, nor will they help you in South Carolina, where you can find a beautiful four-bedroom house for two hundred fifty thousand dollars. Dig into your specific neighborhood, analyze the local inventory trends, and make a decision based on your personal long-term financial goals.
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