'Boomerang migration'—South sees record new home inventory amid national shortage

Southern states see a record number of empty new homes as post-Covid moves slow down
By Meagan Faryna
•
31 July 2024
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The American South has more new homes for sale than they've had in years, which could spell good news for homebuyers in the region.

New data shows that 293,000 newly built houses were on the market in June in southern states, largely driven by Florida and Texas. This number tops the previous high of 291,000 set in August 2006, the last housing boom.

This isn’t the case in the rest of the country because high mortgage rates discourage people from selling their homes, and builders can’t keep up the pace enough to meet demand.

The market in the South, however, is starting to shift.

"There's a measurable correction already occurring in the market on list prices, but it's still a fraction of what the appreciation was," said Nicholas Gerli, founder and CEO of Reventure Consulting, a real estate analysis firm.

"Boomerang migration" driving oversupply

During the pandemic, Florida and Texas became popular destinations for people fleeing the big cities in search of more space and lower costs of living. Investors and builders followed suit, ramping up development to meet the surge in demand.

However, the Covid migration is now waning and even reversing in some areas.

Florida, once the top move-in state, now ranks third according to PODS, a moving and storage company. Meanwhile, Austin, Texas, previously a top 20 move-in city, is now the fifth most popular move-out city.

"You have a little bit of what's called a boomerang migration occurring where a lot of the people who moved into Texas and Florida during the pandemic are leaving," Gerli explained.

"Some of that's happening because people are getting called back into the office, other people got laid off — maybe they work in tech. Other people are just moving back to where they came from."

Investors selling off pandemic-era buys

Adding to the inventory influx, investors who rushed into these markets during the pandemic are now selling their properties to capture high prices before they potentially fall further.

In Texas, 13.6% of sellers this year are investors, higher than both the state's pre-pandemic average of 8.4% and the current national average of 11.7%.

Florida is experiencing a similar trend, particularly in the condo and townhouse market.

It would now take 7.4 months to sell all the condo and townhouse supply on the market, up from 3.6 months a year ago. A six-month supply is considered a balanced market.

Rising costs are another factor driving out investors.

Both states have seen increases in property taxes, and Florida is grappling with skyrocketing homeowners insurance premiums as many insurers abandon the state due to increased hurricane risks.

While the South may be basking in an oversupply, the national numbers are quite different. According to a recent Zillow analysis, the U.S. remains 4.5 million homes short of meeting demand, up from 4.3 million a year ago.

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