The pandemic-era migration to remote work hotspots is reversing. As inward migration slows and borrowing costs rise, cities like Austin and Denver now lead the US in the share of home sellers forced to reduce their asking prices, creating a new wave of economic pressure on top of declining commercial property values.
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Current real estate deliveries were financed in the 2020-22 low-rate era, causing a temporary supply glut in high-demand sectors like Sunbelt apartments. Since new construction halted in 2023, today's depressed prices offer a unique entry point before supply normalizes and rents can accelerate.
As mortgage rates fall, more homeowners will list their properties, increasing inventory. This rise in supply will happen concurrently with the rise in demand from improved affordability. This dynamic will prevent a surge in home prices, keeping annual appreciation capped at a modest 2% for the upcoming year.
Recent housing data, including prices, sales, and construction starts, indicate the market is no longer in freefall. However, it has bottomed out at a very weak level, comparable to the financial crisis or the pandemic's peak, with no signs of a strong recovery.
Existing homeowners have resisted price cuts due to low mortgage rates, but they will eventually face the same market realities builders are addressing now. This delayed "price discovery" is expected to cause a 1-2% nationwide decline in resale home prices in 2026.
Counterintuitively, the best multifamily markets aren't high-population-growth cities like Austin. These attract too much new supply, capping rent growth. The optimal strategy is to find markets with barriers to entry and minimal new construction, as this creates a durable runway for rental increases.
The difference in home price trends between US regions is not about weather or jobs, but housing supply. States in the South and West that permit widespread new construction are seeing prices fall, while "Not In My Backyard" (NIMBY) states in the Northeast and Midwest face shortages and rising prices.
The current housing market is not a cyclical bubble that will pop, but a structural crisis. It's a permanent collapse of opportunity driven by policy failures, corporate consolidation, and demographic incentives that have created deep, lasting scarcity, fundamentally changing the nature of homeownership in America.
To maintain sales volume, two-thirds of builders are using incentives, with many cutting prices outright. This has led to a rare market inversion where the median new home price has fallen below the median resale price, a phenomenon seen only a few times since the 1940s.
Three-quarters of US household wealth is in homes. BlackRock's Rick Reeder argues that a healthy housing market is critical for the broader economy, as it unlocks labor mobility (allowing people to move for jobs) and creates construction jobs. Lower mortgage rates are key to stimulating this velocity.
While local policies like zoning are often blamed for housing crises, the problem's prevalence across vastly different economies and regulatory environments suggests it's a global phenomenon. This points to systemic drivers beyond local supply constraints, such as global capital flows into real estate.
