Mansion Global host Katrina Campins discusses the state of the housing market on Making Money.
An affordability crisis has forced many would-be homebuyers out of the U.S. housing market as high mortgage rates and limited supply continue to drive up prices.
But buyers may find relief in certain parts of the country, where increased inventory has led to a drop in prices, according to a new report published by Realtor.com.
Known as “cold” housing markets, these are places where homes can be listed for more than a year – leading to a significant drop in list prices amid lethargic consumer demand.
The coldest markets can currently be found in the South, especially along the Gulf in states like Texas, Florida and Louisiana, the report shows. In fact, among the 20 coldest housing markets in the country, 15 are located in Texas, Florida and Louisiana.
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Lake Charles, Louisiana, was the coldest metro in the country, followed by Houma, Louisiana; Panama City, Florida; Punta Gorda, Florida; and Naples, Florida.
Water houses near Naples Pier in Naples, Florida, on February 13, 2024. (Photo: Lisette Morales McCabe/Bloomberg via Getty Images / Getty Images)
In Texas, some of the most beautiful cities were Brownsville, El Paso and Corpus Christi.
Realtor.com based its analysis on a number of factors, including days on market, inventory changes, price fluctuations and unique page views for the property listed.
The Gulf states are likely to experience a cooler housing market than the rest of the country because of some “unique challenges,” Realtor.com economists said. Although high home prices and rising mortgage rates have impacted affordability nationwide, Bay Area markets are facing the additional burden of expensive home insurance costs.
Researchers have blamed rising insurance prices on several issues, including weather disasters, rising reinsurance rates and major home repairs as inflation pushes the cost of building materials higher.
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“For homebuyers looking for comfort, Southern markets offer much-needed hospitality,” said Ralph McLaughlin, Realtor.com economist. “Inventory — especially entry-level homes — is picking up, they’re moving slower, and listing prices are actually down compared to last year.”
Homes in Hercules, California, on August 16, 2023. (David Paul Morris/Bloomberg via Getty Images/Getty Images)
There are a number of driving forces behind the nationwide affordability crisis.
Tall The covid-19 pandemichome prices rose at a pace not seen since the 1970s. Homebuyers — flush with stimulus money and eager for more space during the pandemic — took advantage of record-low mortgage rates and flocked to the suburbs .
Demand was so strong and inventory so low that at the peak of the market some buyers forgoed home inspections and appraisals or paid hundreds of thousands over asking price.
The power stopped when Federal Reserve embarked on the most aggressive campaign of raising interest rates since the 1980s as it sought to slow the economy and suppress runaway inflation. Higher interest rates helped push the average 30-year mortgage rate above 8% for the first time in years.
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These higher mortgage rates, in turn, created a “golden handcuff” effect in the housing market. Sellers who locked in a record low mortgage rate of 3% or less during the start of the pandemic have been reluctant to sell, further limiting supply and leaving few options for eager potential buyers.
Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan this week fell lower to 6.86% from 6.87%. While this is down from a peak of 7.79% in the fall, it remains significantly higher than the pandemic-era low of just 3%.