Sun Belt Housing Market Shows Signs of Recovery After Years of Price Drops

Sun Belt Housing Markets Show Signs of Stabilizing Inventory

For the past few years, the southern half of the United States experienced a sharp real estate downturn following an intense pandemic-era boom. Metros like Austin, Texas, and Cape Coral, Florida, became symbols of the housing headspin, with values dropping significantly from their 2022 peaks, according to Zillow data cited by Business Insider. Austin home values remain more than a quarter below their peak, while Cape Coral prices slid by 22%. However, data tracked by John Burns Research and Consulting shows that the two most oversupplied states have seen sharp drops in unsold inventory held by homebuilders. Florida and Texas inventories are down 37% and 29% from their respective peaks. Across the broader Southwest region, builder inventory has declined 29% from a year ago. Active listings are also falling, with Zillow reporting July active listings down nearly 5% from last year’s peak in Austin, and down roughly 20% and 14% in Cape Coral and Jacksonville, respectively.

Analyst Perspectives on Austin and Regional Pricing

Rick Palacios Jr., director of research for John Burns Research and Consulting, recently purchased a home in Dripping Springs, a suburb south of Austin, describing the market as an opportunistic time to buy. Due to steep price declines since mid-2022, John Burns ranks Austin as the only fairly priced large metro in the country based on a comparison of current and long-term ratios of housing costs to incomes, trending about 9% above its historical average. By contrast, Indianapolis is labeled very overpriced at 43% above its long-term figure, alongside Philadelphia and Chicago. Other Sun Belt cities like Tampa, Houston, and Dallas remain overpriced in the 15% to 20% range. While builders remain skittish about adding new supply in Austin, publicly traded homebuilding executives report stronger performance in geographies with limited inventory. Meritage Homes, D.R. Horton, and PulteGroup executives noted consistent sales performance and order increases across parts of Texas, Georgia, the Carolinas, and Florida during recent earnings calls.

Persistent Economic Headwinds and Future Outlook

Despite shrinking inventory, economists remain cautious about declaring a definitive market bottom. Mischa Fisher, Zillow’s chief economist, noted a very good chance that Florida and Texas have found their bottom, but cautioned against false rebounds reminiscent of late 2023. Mortgage rates hovering near 7% continue to keep many potential sellers on the sidelines, reluctant to give up lower rates secured in prior years. Jason Lewris, cofounder of housing research firm Parcl Labs, noted that nearly half of Texas listings have seen price cuts, suggesting further price adjustments may occur over the next year. Meanwhile, Compass chief economist Mike Simonsen pointed out a distinct divide in Florida between luxury segments and affordable price points, where buyers remain highly sensitive to interest rates. As the market moves forward, analysts suggest any broader recovery will likely unfold gradually rather than through an immediate rebound.