Home Prices Drop in 5 States Within 3 Months

Home Prices Drop in 5 States Within 3 Months – Essential Data Alert

August 5, 2024

Leading Indicator of Housing Market Declines

Did you know that anytime home prices in the history of our country and in our marketplace have ever fallen, there’s a leading indicator that gave us advanced warning that those markets are starting to crumble? Did you know that five states right now have absolute alarm bells going off in the face of unsold inventory that is absolutely surging, telling us that right now we have issues going on in this country?

The Leading Indicator Revealed

One of the things I’m gonna take you through in a second is one of my favorite leading indicators and what it’s starting to say about a few specific states that I’ve been watching for some time. And now I have to tell you, it is incredibly, incredibly rare that this particular metric starts to shift in the way that it has. And mind you, it’s shifting during moving season.

Market Troubles During Peak Season

We’re in peak season where homes across the nation, most buyers are moving into the market trying to purchase something before the kids go back to school in August. And the fact that we’re actually seeing this massive alarm going off now at a time when the market should be very balanced, it should be moving very swiftly. We’re seeing trouble my friends today.

Specific Markets to Watch

I’m gonna point out for you some specific markets that, if you are looking to buy, these are gonna have opportunities where you should be paying attention to specific areas in these states that will have much more opportunity for you to actually provide a discount. But let’s set the backdrop right here.

The Precipice of Market Data

We are on a precipice here as I’m shooting this live stream, heading into the marketplace where the realtor data for June, which is really the peak, the top, the bell, top of the bell curve every year for the housing market. We’re getting data now that’s coming out. Listen to what is coming out from leading economists. This is from the Calculated Risk newsletter that’s giving us an early reading because this data is not here yet.

Early Reading of June's Data

June’s data from the National Association of Realtors for all the resale market inventory is coming next week. But listen to this based on publicly available local MLS reports across the country. So this economist grabbed the data and started looking that we are in a seasonally adjusted annual rate of selloff in the resale market for 3.93 million homes. This is down 4.4% over the prior year. This is not good.

The Situation in 2023

Understand this: what you have in front of you is a situation where last year, 2023, was a terrible year for selloff. We sold 4.07, just a little over 4 million homes, which marks a 30-year low in selloff. Well, my friends, we are now seeing that in the entire U.S., sellers are bringing inventory to the marketplace at a much higher rate than at any point in the past couple of years.

Surging Inventory

It’s one thing if you sit back and you’re like, “Hey, you know what? It’s no big deal. There’s not a lot of buyers out there. They’re not buying homes. It’s not a big deal if inventory stays very low.” But in a few states that we’re gonna see today, you’re seeing an absolute surge. This is not the only indicator.

Price Cuts and Market Impact

I’m gonna share with you the fact that inventory surging is one thing, but one thing that we are going to see today is that people bringing their homes to the market right now in a few select markets are absolutely cutting the price. They’re bringing them much lower than a year prior. And what that means is if people are bringing homes into the market right now, as I’m shooting this June, July, August, September, going into the fall of 2024, the pattern continues. That inventory is unsold and people are bringing more listings and buyers for the reasons that they have are saying, “I’m not buying it. I’m out.” And they’re essentially leaving the marketplace. You have serious danger unfolding in the market in that people who have to sell start cutting the price.

Year-over-Year Supply of Inventory

Let’s take a look at this marketplace. You have the United States year-over-year supply of inventory. You have Washington up nearly 50%. Arizona’s over 53% year-over-year. That means the supply in Arizona is 53% higher than it was last year. Obviously, Colorado’s up 44%. Texas, by the way, Texas is up 42%, but their year-over-year inventory growth is against an already significant number last year. So, Texas was already setting some numbers a year prior. So they’re up 42%, they’re 42% on much higher numbers than most of the rest of these states. You have Georgia up 52%, South Carolina up, North Carolina up, and even Tennessee. Notice that all the states in the bottom up are almost 38% in Tennessee.

Focus on Southern States

I’m gonna zoom in on this map so you can see it. But look at the southern states. 40% plus Alabama’s up 43% plus Georgia’s up 53%. Florida’s obviously up 71%. The hidden story in Florida is condos are exploding in this number. So in Florida, you might have 70% up over last year, but in condo territory, you’re up nearly 100% year-over-year. And I got a story coming out next week you don’t want to miss on that. But listen to this, look at all the southern states. Almost 46%. These bright red numbers represent the biggest jumps in the country for inventory year-over-year. If they’re bright red, they’re seeing a surge.

The Leading Indicator: Median New List Price

Then let’s take a look at one of my favorite leading indicators. What attracted you to the video? Jared, where are the prices falling? I’m not impressed. Ah, we have property growth—big deal. There’s a lot of listings. I get it. This, my friends, is a chart called median new list price. This is one of the most under-reported, one of my favorite lead indicators that if you watch this, this is a very unique pattern. But when you see states going blue, they’re in danger of negative price year-over-year in the next three to four months. Why is that? Well, look at this. Down here in Florida, the average seller is putting their listing on the market nearly 6% under the prior year.

Rare Occurrences in Historical Data

Now you have to understand that in all these marketplaces, when their asking prices are coming into the market beneath a year ago, it is a very rare occurrence in the history of Florida. It’s only happened two other times, three other times in a massive eight-year span of data. The last time it happened was when we shut the entire economy down for the pandemic, right? We all of a sudden had one month, boom, people start freaking out and asking a lot less. Another time it happened was in 2022 when we first started having the interest rates jacked up. When that happened, we had price loss in our median sale price. So what happened is as soon as the interest rates start climbing, people start seeing all this inventory coming because we go from 3% interest rates to 30-year fixed to a 7% interest rate overnight. And all of a sudden what you have is people start slashing prices.

Interest Rates and Price Adjustments

Nobody knows. And it’s not obvious why they reported in 2022 towards the end of the back half of that year. Yes, there’s a seasonality of slowdown, but overall we had a big correction across the U.S. that started to show up in the data in 2023 where Florida, for instance, it was a 9% dip in price in six short months when the interest rates surged. And what you’re seeing now, this is even bigger in terms of prices being cut year-over-year than we saw in 2022 that precipitated in a 9% change in the median sale price reduction.

Future Implications

So you’re saying, Jared, what are you saying? I’m saying that this is a move that you have to pay attention to. So take a look at the states here that are negative. There are a bunch. The entire south is blue, except for Mississippi. Tennessee is negative 2.27%. Oklahoma’s negative 3%, Texas negative 3.52%, Colorado negative 3.85%.

Year-over-Year Inventory Trends

My friends, you have to understand, take a look at the line. Let me just show you this chart, okay? Just to illustrate what I’m saying to you, okay? This chart right here, I’m just gonna pull Florida, just to give you an understanding. This is the zero line, right through the middle. You see this line right here at the base of this massive mountain. This means that year after year for this entire seven-year graph, look how many times that a single month comes way down here where people are actually asking less than the year prior. It never happens.

Look at Florida right now. It’s straight falling off the graph for about four months straight. Straight down. Look, this was the previous time I was pointing out we only had a 3% one single month. We wrote 3% negative one single month in 2022. By the end of this year, the price that year was down negative 9% median sale price from peak June to January of 2023. And all we saw was a negative write down of 3%.

Current Market Trends in Tennessee

You’ve got this, my friends. You say, Jared, big deal. What does that mean? Well, you got Tennessee, for instance. Take a look. Look at it. It’s never been below the line ever. It’s never even been close to 0%. Why is that happening? If I pull Tennessee’s inventory and I pull it up on the chart, you’re gonna see a move in Tennessee where for the past five or six months through moving season, all of these states are surging inventory, not being sold, record low buyer activity. Buyers are like, “Oh, not doing it. I’m not in, can’t afford it.” For whatever reason, the sellers are deciding to sell.

Serious Market Changes

But this, my friends, what precipitates from this? You can’t look at this and say, “Jared, because if you don’t understand what you’re seeing, you’re thinking, oh, that’s just a, I’m in Tennessee, I’m only giving up 2.27%.” No, you’re not. You’re not just giving up 2.27% in Tennessee. You have to understand how much do you get from your asking price? Do you get full price? No, statistically in Tennessee or Florida or anywhere else, you ask X and then you give down even more.

So you end up at 96 or 97% of your asking price. So if you started 2% negative to last year, you’re gonna end up five or 6% median sold price. If the numbers hold into the future, meaning these homes eventually sell starting below last year, they’re gonna sell below last year, which means in the future, this is gonna precipitate negative price bigger than the 2%.

Regional Variations in Price Drops

So when you’re looking at Florida, it’s a little bigger. Now every area is different. So here we go. Let me show you the areas in Tennessee, for instance. So if you take Nashville, Nashville is 2.65%. Nashville is under, it’s trending down. Sellers there are seeing competition and having to compete. Chattanooga is negative three. So Chattanooga is indexing over the state. It’s actually doing a little worse. Knoxville’s only 1.05%. But look at Sevierville, obviously where all the Airbnb is around Gatlinburg, this and that, look, negative 5.72%. Now why? Because they’ve been adding inventory this entire time and it’s starting to catch up.

Market Trends in Other States

And I could take you state after state. Folks, this is not being talked about. And it is a huge problem because when you start seeing any of these states, any of these states that are in the blue, they’re starting to trend negative against the prior year. The more populous the state, I would say, in my opinion, the more reliable the data. So for instance, you can see Idaho, negative 1.46%, Colorado’s negative 3.85%, Nebraska negative two, Iowa negative 1.5%. And again, folks, fascinating to see where is the trouble?

When you pull back and look at the map, where are the problems? The problems really seem to be arising in the southern states. The Sunbelt states, the same states that we’re hearing have issues with high eviction rates, the same states where many of these states are starting to see rent income declines, many of these same states suffering with all kinds of cost of ownership that has spiraled out of control with this inflation where people can no longer keep their houses.

Focus on Texas Markets

Let’s take a look at Texas again. I just wanna show you this. Texas has been already seeing negative prices all through the state. They’re one of the few. They only saw themselves dip below this line when they locked their country down in 2022 in April. That’s the only time it ever has been below the line in a seven-year run. And Texas obviously floundering. Let’s take a look at the metros. Where are the metros in trouble in Texas?

Metro Analysis in Texas

Dallas Fort Worth is down 2.96%.
Houston is down 1.35%.
San Antonio is down almost 5%.

Smaller Markets in Texas

Then you have a lot of the outlier markets here that are negative. You have Snyder, which, who knows if anybody even lives there, the average price is like $157,000 or whatever. So you have different markets that are being affected in different ways. Look at all the south, the southern border area down here, all negative. This one market down here, negative 21%. So you’re having a massive change.

Austin Market Trends

Look at Austin. The entire Austin metro area is listed here, negative 5.17%. And you say, what does that mean, Jared? That means that this year people there are asking $550,000 median. Last year, they’re asking almost $580,000. And again, they’re not gonna sell for $550,000. They’re gonna negotiate further. I know what you’re saying. Yeah, there’s big numbers in that marketplace, Jared. There’s some, you know, they’re selling homes for far more than five. This is the median, okay? This is cutting the middle. This is eliminating the outlier adjustments when you’re looking at data. So this is actually, I think, one of the relative easy ways to look.

Southern States Inventory Trends

But look at this. If you zoom in on the south, it’s all blue. It’s a big, it’s a big blue wave. It’s the only time we could say that about the south, isn’t it? Oh no, no political jokes on this channel, please. All right, here we go. So you can see here, and I’ve covered Florida, I won’t even look at Florida on here, but let’s take a look at some of these key markets.

Atlanta Market Trends
Atlanta is down negative 2.85%.

Tell me in the comments how you feel in Atlanta. ‘Cause I know some of these people are gonna get on and say, “Atlanta’s doing great.”

Charleston Market Trends

Charleston, North Carolina negative 4.6%.

Charlotte is break even. So Charlotte is flat. It looks like they’re really kind of taking on a lot of their inventory.
Myrtle Beach down 6%. Myrtle shifting.
Additional Market Insights

So looking at a couple more just to see, I obviously don’t know too many of these markets well, so I’m looking for big markets.

Columbia down negative 6.52%. That’s in South Carolina.
Asheville is positive. That doesn’t surprise me.
Memphis is positive.

Market Dynamics

See, this is my base case: the markets you see that are red are red because they’re cheap. If you’re gonna migrate to Tennessee, what’s the cheapest major metro you have? Is it Charlotte? I don’t know. Charlotte’s negative. I’m sorry, I said Charlotte. I meant Chattanooga. Chattanooga’s negative, but Chattanooga’s $430,000. Charlotte’s like mid threes. Charlotte $349,000 for median new list price. So, you know, if I’m gonna buy in Tennessee and I need the most affordable place, you know, a lot of these ones that are still bright red are bright red because that’s the only thing people can buy.

Affordability and Inventory Dynamics

And I mean, that’s the interesting thing is, you know, a lot of the markets that are still pushing are by default being selected by buyers for the sake of affordability. Otherwise, the lack of affordability is creating unsold inventory by reverse.

Local Market Considerations

Listen, you have to pay attention. If you’re in any of these states, you will watch the local market because some of these you can see, and I would tell you this: we are now at the top of the bell curve for the year. That means we’re splitting the halfway point. From here on out, it gets slower. So we’re at this, this is the mind-boggling part: we’re at this point, we are seeing this push for numbers and a price pressure at a moment when, if this 2024 year was gonna see a dent, a gain, a gasp of energy, now is when it would be here. It would be like right now, you’d have properties turning over.

Reacting to Surging Inventory

People would put homes in the market if inventory was surging in Florida, Louisiana, Georgia, Tennessee, or any of these marketplaces. And again, forgive me, the Midwest, Colorado, I know you’re in there, I know up north, Idaho, you’ve been in this trench for a long time. These markets, again, are surging inventory. This is a reaction to surging inventory. It happens anytime a marketplace feels like there’s a lot for sale. You know, and the person calls their realtor, “I’m not going to argue with you. I see inventory all over my street. Okay, we gotta price this, right?” And when you start to see inventory coming down, that means the people in the market are now saying, “You know what? We will compete at a lower price because we must be the next people out of the market.”

Leading Indicator for Future Sell Price

Ultimately, I told you this before, this is going to precipitate a future. This is a leading indicator for future sell price. Now, mind you, the other thing of this, okay, this is a caveat that’s just plain sense. This is a month worth of data on the screen. This is, okay, Texas, for instance, Tennessee, Florida, they’re putting new listings in June and they’re this far down below last June. So you’re seeing a month of new inventory negative to last year. So that just means the listings that jumped into the market in Texas went into the market in Florida in the past 30 days prior to July. Those were down, those were low, but that’s not all the homes, that’s a segment of the homes.

Impact on Future Trends

For instance, in Florida, all the supply, again, that’s cheaper, median price-wise to last year lands, it may be only 25% of all the available homes. But if that happens, and it has been, you have two or three months now in Florida, for instance, where it’s below last year, below last year, eventually your inventory becomes inundated. There’s a lot of homes that are now running against last year, and you have a wider base of homes starting to go through closing that then create the future trend.

Predictions for the Coming Months

Now you say, Jared, what do you think will happen? Okay? I think you could set your watch that between three and five months, okay? Because remember, these are slower markets. We’re going into even slower season where sales are gonna be even tougher with more sellers trying to escape the exits. You know, that’s what we’re seeing. We’re now at peak season. All of a sudden, we’re reading calculated risk saying, “We had a poor 2023, and got news fellas, we’re gonna see data next year saying that one of the strongest months on record, which is supposed to be June, isn’t even gonna hang. It’s gonna annualize. Our seasonally adjusted annual rate is gonna go and be down. We’re gonna be below last year. We’re not even gonna hang with how bad it was last year.”

Conclusion

Mind you, a lot more sellers are pushing, a lot more sellers are going in, and there are more houses, more houses, and buyers. There’s less than last year. And last year was a record low. So you have to understand that is the dynamic at play here. And we are seeing that in the markets where people feel that shift, they are bringing it. And what’s gonna happen is this will bleed into the sold data and the median list price or the median sold, your median price, your median home price, where you live, and the markets that are getting more of their share in these states.

You know, I showed you Sevierville in Tennessee. I know of, you know, marketplaces like the Gulf side of Florida. The highly inundated condo markets in Florida are getting buried and seeing a nosedive in future selling price, potentially a nosedive in future selling price if these new listings come to fruition. They sell because they’re gonna write down lower numbers in the future.

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