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Housing inventory is falling and surging in different parts of the US as higher rates distort the market.
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A Realtor.com report found that home supply fell in 21 of the 50 largest metropolitan cities in May.
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But housing activity has kicked up in the South as increased affordability draws both buyers and sellers.
Mortgage rates at 20-year highs have split the US housing market, with supply plunging in some parts of the US, while the number of homes for sale surges in others.
Home inventory fell in 21 out of 50 of the largest metropolitan cities last month, according to a report from Realtor.com. San Jose, California saw the steepest decline with 35% fewer active listings in May compared to the same month last year. That was followed by Sacramento, California with 27% fewer listings compared to May 2022, and Hartford, Connecticut with 26% fewer listings.
But while the home inventory has continued to fall off in certain areas, supply has surged in other pockets of the US, mainly in the South.
Active listings in the region jumped 54% in May compared to last year, though the overall housing supply is still 41% lower than it was before the pandemic. Nashville, Tennessee led the wave of new inventory that has hit the Southern housing market, with listings growing 124% over last year. Listings in Austin, Texas grew 113%, while listings in San Antonio, Texas grew 93%, the report said.
The divide has been largely created by high mortgage rates, which have spurred housing activity in more affordable areas of the US.
In more expensive metropolitan areas, high borrowing costs have sidelined many prospective home buyers, causing demand and home prices to fall. Meanwhile, falling home prices at high rates have discouraged existing homeowners from putting their properties up for sale, leading inventory to dry up.
But the dynamics are different in the South, where properties are relatively more affordable, according to Bankrate. That has buyers more willing to enter the housing market, which has propped up home prices and offered sellers more incentive to list their homes.
The result is a more active housing market in the Southeast US, which contains 18 of the 20 hottest housing markets, according to Bankrate’s Housing Heat Index.
But while the Southern housing market is benefitting from higher affordability, it’s uncertain when affordability will improve in the broader US market, with the average rate on the 30-year fixed mortgage hovering above 7%. Prices are unlikely to fall overall until mortgage rates pull back, Redfin’s deputy chief economist Taylor Marr told Insider, though his estimated rates would only ease to around 6% by the end of the year.
Read the original article on Business Insider