More on Housing

House prices are falling, but there are wide regional disparities

I, a Connecticut renter, despair of ever being able to afford a house. There are some signs, though, that even though affordability remains challenging, the housing market may be beginning to turn.

This aggregate picture hides wide regional disparities, though.

My housing heuristic is still that areas that can build new construction will see lower prices in the existing homes market — this isn’t some complicated theory, it’s just supply/demand, Econ 101 stuff — and that may be what we’re seeing in the chart above. But there is another dynamic in play, equally simple and equally as powerful: there are more sellers than buyers.

There is a real estate truism that every seller is also a buyer, which means that those lines above usually move in tandem because when someone sells a house they also need to buy one because they still need to live somewhere. This isn’t, strictly speaking, true, though. There are lots of reasons why you could sell a house and not buy one. You could become a renter, you could get married and move into your spouse’s house, you could die, or you could own multiple houses and be disposing of some of them. That last one seems to be what is happening, at least according to Rick Palacios of John Burns Research & Consulting:

This dynamic doesn’t help me — Connecticut doesn’t tend to be a big vacation home destination — but this sort of thing has a tendency to spread. House prices being down nationally can leak into price setting expectations by listing agents and create a self-fulfilling dynamic in regions that aren’t even directly affected by the original dynamic. People could even move from places with high housing prices and brutal winters to those places with more affordable housing and more temperate climates. Places like Florida, Texas, the Southeast, and Southwest.