In July's newsletter, I spotlighted changing trends in both single-family permitting (going up) and housing inventory (going down) in the Southeast. As of October 2023, the permitting downtrend has continued to show bottoming and a return to uptrend, although the 12/12 value is still negative in all states. However, the decline in housing inventory, defined as the combined number of listings and pending sales, appears to be reversing and increasing across the Southeast.
Permitting and inventories increasing simultaneously could indicate challenges in matching supply with demand. If builders anticipate higher demand that fails to materialize, we may be looking at an oversupply of homes compared to demand.
Existing Home Sales are a Key Indicator of Housing Demand.
With prices remaining elevated and most homeowners having interest rates at or below 4%, many are reluctant to sell into a market with much higher interest rates, resulting in reduced demand. Home sales in the South have dropped to levels not seen since 2013, down by -23% YOY and -30% from the mid-2021 peak.
(Existing Home Sales in the South -12 Month Moving Total)
(Existing Home Sales in the South - 12/12 & 3/12)
Will Demand Return?
Despite the possibility of an interest rate cut, economists predict a recession in 2024, and HARDI suggests that we should expect home sales to stay subdued until there's an improvement in housing inventory and consumer sentiment. As a result, permitting may soon reverse course as the market adjusts to suppressed demand.
Marketing, Operations & Technology Manager
Shupe Carboni & Associates