Housing inventory up, prices down?

It’s been a minute since my last post & a lot has changed. A new president is in the white house and new economic data provides a bit more clarity on the future of rates. But, what is the situation we sit in right now and where are we going the next 3-6 months?

If you live anywhere in the south, especially Florida or Texas, you continually hear about how inventory is up, which it is, but not as crazy as you think. We are just above precovid levels:

Although on a national level, we are still below pre covid levels. By ~35%:

When reading headlines, one would think the real estate market is struggling, with mortgage rates over 7% & no sight on lowering. Struggling may not mean what we think. When I think of a struggling market, I think of high inventory making it difficult to move your product, resulting in having to lower your price to sell. That just does not appear to be the case. 2024 saw record prices in real estate for a fair chunk of the country & 2025 is slightly lower but poised to go on the same run the coming 3-6 months:

From the FED’s perspective, why would they cut? CPI is still coming in above 2%, housing looks stable & the consumer appears to be healthy (even though sentiment is going down). Yes, there are going to be certain cities like Cape Coral FL that are struggling to move inventory, but this is an example of a city that was one of the biggest winners from the COVID money printing (gained ~85% value during covid). So, in this market, a ~10% pull back may be necessary, but by no means is recessionary.

What are my thoughts? The next 3-6 months majority of the United States will trade flat. With an uptick in inventory, some homes may sell for a discount, but nice homes in desirable areas will continue to be in demand, as we have a strong consumer. The Florida market will continue to struggle, but not much lower, as investors are beginning to become more involved as comping out resale is becoming easier due to last fall being a low time.

We are at a stalemate where the Fed could come out, double down on not cutting rates for the foreseeable future which could cause home prices to drop throughout 2025, or the contrary, they could ease their policy, indicating a cut over the next 3-6 months, stabilizing the housing market, involving more buyers, and setting up 2026 for a strong year. All eyes on the fed, in specific, CPI & housing prices.