Sun Belt Real Estate Sellers Cut Prices While Midwest Markets Hold Firm

The real estate markets that dominated headlines during the pandemic now face a different reality. Cities across Florida, Texas, Arizona and other Sun Belt states that once saw bidding wars and all-cash offers now deal with mounting inventory and anxious sellers. Markets in the Midwest and Northeast that barely made news during the work-from-home period are quietly outperforming their southern counterparts.

Home sellers across the Sun Belt are among the most motivated in the country. They are cutting prices and extending listing times to attract buyers. This represents a significant shift from just three years ago when these same markets were among the hottest in the nation.

Supply Growth Outpaces Demand

The Sun Belt’s current challenges stem partly from decisions made during the pandemic’s peak. Between 2020 and 2024, the South region added approximately 3.3 million housing units according to U.S. Census estimates. That figure dwarfs the 750,000 units built in the Midwest and just 483,000 in the Northeast during the same period.

Austin exemplifies this trend. The metro area added more than 76,000 for-sale housing units by fall 2024, an 8.34% increase since 2020 per Parcl Labs data. That supply surge coincided with slowing population growth. Net domestic migration to Austin dropped from 44,000 in 2021 to less than 14,000 between mid-2023 and mid-2024 according to Census data. 

Similar patterns emerged across former pandemic hot spots. In Dallas, inventory climbed more than 20% above 2019 levels while prices declined almost 2% year over year according to analysis by Zelman. Tampa’s domestic migration gain of 11,000 people represented just a fraction of its 54,000-person increase during the relocation peak.

Migration Patterns Slow Considerably

For decades, Americans moved predictably from the Northeast and Midwest to the Sun Belt. Between mid-2018 and mid-2019, the Northeast lost a net 294,000 residents to other regions while the South gained almost 408,000 according to Census Bureau data.

The pandemic accelerated these trends temporarily. Florida, Texas, Arizona and North Carolina experienced the largest population gains from domestic migration between mid-2020 and mid-2021 according to Harvard Joint Center for Housing Studies analysis of Census data.

That momentum has faded. Net domestic migration to the South fell almost 38% in the year ending mid-2024 compared to the first pandemic year. The Northeast’s net loss dropped to 192,000 from 390,000 at the pandemic’s height. Domestic migration to the Midwest improved by approximately 60% in the same comparison period, though it remains negative in absolute terms.

How Seller Motivation Gets Measured

Parcl Labs created a Motivated Sellers Index combining four factors: the number of price cuts on listings, time between cuts, size of price decreases and days on market. Higher scores indicate greater seller urgency.

The analysis reveals stark geographic divisions. More than half of single-family homes for sale in Denver, Charlotte and Jacksonville have experienced price cuts. In Boston, Philadelphia and Buffalo, fewer than one-third of listings fall into that category.

Counties with the highest motivated seller scores cluster heavily in Texas, Florida, Tennessee and parts of the Mountain West. Jason Lewris, a Parcl Labs cofounder, describes the index as a pretty good proxy for where home prices may go. Current seller motivation signals potential future price declines.

What This Means For Property Owners

The diverging market performance creates distinct challenges for property investors and fund managers. Real estate operators in Sun Belt markets face pressure on projected returns as appreciation stalls or reverses. Properties purchased near market peaks in 2021 or 2022 face challenges when combined with higher interest rates and declining values.

Properties that worked financially at 3% mortgage rates face dramatically different debt service coverage ratios at current rates above 6% according to Freddie Mac data.

Midwest and Northeast markets offer more stable value retention but limited inventory for growth. Detroit, Cleveland, Milwaukee and Buffalo all show inventory levels below 2019 marks with prices up 4% to 8% year over year per Zelman analysis.

The Lock-In Effect Reshapes Markets

Homeowners with mortgage rates below 4% are delaying moves they would otherwise make. This lock-in effect disrupts traditional migration patterns. When existing homeowners don’t sell, first-time buyers in northern markets can’t find entry-level inventory while Sun Belt markets lose a key source of demand.

The broader labor market reinforces this stasis. The quits rate, measuring workers who voluntarily leave jobs, remains subdued. Mike Simonsen, chief economist at Compass, monitors this metric as a leading indicator for housing market mobility. Until workers feel confident changing jobs, major life moves like relocations may remain suppressed.

What Comes Next

Market analysts see limited catalysts for meaningful price reacceleration in Sun Belt markets facing oversupply. Ryan McKeveny, managing director at Zelman, notes that in markets where prices have flattened or declined, he doesn’t see a reason why home prices are going to reaccelerate meaningfully.

The advantage currently enjoyed by Midwest and Northeast sellers could persist for years absent significant changes in mortgage rates or migration patterns. However, the real estate cycle eventually turns. When mobility increases, homebuilders’ historical preference for Sun Belt construction could eventually rebalance supply and demand dynamics.

Position Your Real Estate Strategy For Market Shifts

Florida’s real estate markets sit at the center of these national trends. Understanding local supply dynamics, buyer behavior shifts and financial performance metrics helps property owners and investors make informed decisions in uncertain conditions.

Together, we help real estate leaders do Moore. Our accounting, advisory and tax services support the financial strength of real estate developers and investors throughout market cycles. Visit our Real Estate Services page.

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