The allure of pandemic boomtowns is either fading fast, or simply a rebalance of sorts. “These pandemic boomtowns, they just got way too expensive over the last two or three years,” Nicholas Gerli, chief executive of Reventure Consulting and Reventure App, said in an interview with CNBC Monday. (Reventure provides access to what it calls real-time housing data.)
He continued: “They’re 20%, 30%, maybe even 40% overvalued in some cases; and now that we’re seeing the inventory levels spike and the number of price cuts on the market spike, that’s the signal for you all out there that the market is shifting down, particularly in Texas and Florida. Those are the two markets right now where we’re seeing the biggest downturn.”
It’s no secret that a lot of Californians became Texans and Floridians during the pandemic. It was the newfound ability to work from anywhere, a need for space, and ultra-low mortgage rates that set off the pandemic-fueled housing boom. Home prices rose substantially in only a few years, and some metropolitan areas are seeing that come to an end.
As Fortune previously reported, an analysis from Redfin published earlier this month found home prices are falling in four major metropolitan areas across the country from a year earlier as demand dampens—and three are in Texas. Meanwhile, a separate Redfin analysis, also from this month, said “housing markets in western Florida are cooling faster than anywhere else in the country as natural disasters intensify, new construction soars and the pandemic-era homebuying demand boom fades further into the rearview mirror.” Of the 10 housing markets listed as cooling the fastest, six were in Florida, and two were in Texas.
“I was actually one of those people who moved to Austin,” Gerli said. “I saw it firsthand, prices there went up 50%, 60% in two or three years, and now they’re almost down 20% already. I mean Austin is a market that’s legitimately crashing, that’s not an exaggeration. Prices are down almost 20% there, and they’re going to continue to go down due to those skyrocketing inventory levels.”
There is more inventory in Austin, and prices are down considerably from their peak. But the metropolitan area’s home prices are still much higher than they were before the pandemic, and given that we’re missing millions of homes, an increase in supply might not be the worst thing. Austin is definitely one of the most widely discussed markets in our current housing cycle for becoming one of the hottest before falling from grace, but consider this: A major problem with California is that it doesn’t build enough homes, and its policy failures led to the state’s housing crisis. Texas is the opposite: It built more homes than any other state last year, and its top three markets by housing starts built 300% more homes than California’s, as Fortune previously reported.
“I saw it in so many different cities in this housing cycle: Austin, Phoenix, Boise, Tampa, Jacksonville, in a lot of these markets, people said it would never go down,” he said. “As we speak, it’s starting to go down, and the telltale sign is those inventory figures.”
Gerli continued: “We have lots of investors selling, we have a huge homebuilder permitting pipeline that’s still getting delivered over the next year. And in addition, particularly in Florida, we’re seeing a lot of regular homeowners being forced to sell their homes because of skyrocketing insurance and HOA fees.”
In each metropolitan area Gerli mentioned above, home prices have fallen from peaks reached during the pandemic—but apart from Austin, values are up from a year earlier, per Zillow. Gerli has been sounding the alarm on home prices for some time. In December 2022, in a video, he forecasted a substantial decline in home values, saying “we’re firmly in an era where home prices are going down in America.” But national home prices are up.
