In this episode of The REconomy Podcast™ from First American, Chief Economist Mark Fleming and Deputy Chief Economist Odeta Kushi examine local housing market dynamics, explaining how changes in active inventory and new inventory impacts house prices and sales volume, and highlighting how these dynamics are playing out differently in markets across the country.
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“In December, the growth in new listings is in Southern and Western markets, and more muted improvements are occurring in the Northeast and the Midwest. There's a strong positive relationship between increasing growth in new listings and improving sales. The more new listings, the more sales, the more listings to choose from, the easier it is to find something you like to buy, enhancing the options available to potential buyers, which helps drive market activity.” – Mark Fleming, chief economist at First American
Odeta Kushi - Odeta, Hello and welcome to episode 109 of The REconomy Podcast, where we discuss economic issues that impact real estate, housing and affordability. I am Odeta Kushi, deputy chief economist at First American, and here with me is Mark Fleming, chief economist at First American. Hey, Mark. You know, we have a lot of expressions in housing, some timeless, some trendy. There's the classic, marry the home, date the rate. And, of course, the Golden Rule, real estate is all about location, location and location.
Mark Fleming - Hey, Odeta, yes, we've all heard that real estate is local, but for a while there it felt like every location was a hot location during the pandemic, it didn't matter where you looked. House prices were hitting double-digit growth everywhere thanks to the record-low mortgage rates and the pandemic-driven demand boost.
Odeta Kushi - But now it seems we're back in a world where real estate is local again.
Mark Fleming - And speaking of local markets, we're recording this on January 31, which means by the time you, our listeners, hear this, we will know the outcome of whether the Eagles or the Chiefs have won the Super Bowl. I don't know if we've covered in this podcast that I'm, in fact, a huge Eagles fan, and it was so close to being a battle between the Eagles and the Bills, your favorite team. Exactly. A veritable duel between economists was averted.
Odeta Kushi - Indeed, sorry, Bills. Next year, though, next year is our year.
Mark Fleming - Seems like they always say that.
Odeta Kushi - I've been saying that for many years now, but I'm telling you, next year is our year. Now, while we don't know who's taking home the Lombardi Trophy right now, we do know something about which NFL divisions win when it comes to house prices. We wrote a blog post not too long ago, which breaks down home prices by NFL divisions, because if real estate is local, then it's fair to ask which teams play in the priciest markets.
Mark Fleming - And, of course, for a football fan like me, this analysis was really fun, because it's the ultimate crossover, at least to a die-hard Eagles fan and real estate economist, football and real estate. What could be better? Well, maybe football and cheese steaks. But I digress, we looked at median house prices across NFL divisions. And spoiler alert, if you're a fan of a team of teams on the West Coast, your housing costs probably come with that luxury tax. Right?
Odeta Kushi - The NFC West, home of the 49ers, Seahawks, Rams and Cardinals, had the highest median home prices of any division. No surprise there, given California's influence.
Mark Fleming - Indeed. And, meanwhile, if you want the most affordable division, that title goes to the AFC North, Browns, Steelers, Bengals and Ravens. Unlike tech hubs or major financial centers, the Rust Belt markets of the AFC North have been seen slower economic and population growth in recent years and, as a result, home prices in the AFC North have remained relatively affordable.
Odeta Kushi - However, with their more affordable cost of living and lower barriers to home ownership, there is an argument to be made that these markets, while not the home of a Super Bowl contender, are actually winning in real estate and may become increasingly attractive to young professionals and families seeking value in a challenging housing market.
Mark Fleming - That's an excellent point, and the Ravens came pretty darn close, actually.
Odeta Kushi - And the Commanders, our home town team.
Mark Fleming - Well, that's NFC East. That's my division, yes. And, when we look at growth, median sales prices in the NFC South markets, particularly Tampa and Charlotte, have increased the most. Net in-migration and a surge in demand for housing earned these Sunbelt markets the label of pandemic boom towns. House prices in markets in the AFC North, such as Pittsburgh and Baltimore, took a more methodical path, growing the least relative to pre-pandemic prices.
Odeta Kushi - All right, that's it. I'm calling an audible, enough with the football. Did I use that term correctly?
Mark Fleming - Sort of, sort of, but you know what? I'm going to give you credit. I'm still impressed with the effort.
Odeta Kushi - A for effort, I tried. All right, so next, I want to talk about another local housing market dynamic, where active and new listings are growing, and what it means for prices, sales and affordability. But first, let's define a few terms. There's a difference between active and new listings.
Mark Fleming - Wait, wait, I think it may be time for my favorite bathtub analogy. Here we go again. I know, I know, but it really works. And, in this case, it really works. So first of all, you have to imagine a bathtub. The water flowing into the tub, got it, represents new listings in the faucet. These are the fresh new properties entering the market. The water leaving the tub through the drain symbolizes closed sales, or delisted listings, properties that have been sold or removed from the market. And the water level in the tub represents the current inventory, all the active listings that are still available. If the water -- new listings -- keeps flowing in, but doesn't drain out quickly -- closed sales -- enough, the water level -- current inventory -- will rise, indicating more properties are sitting on the market for longer periods. It's important to know if the water in the tub is rising because the drain is closing or the faucet is opening. These days, though the faucet is opening and the drain, due to affordability constraints, is closing.
Odeta Kushi - And sticking with this analogy here, rising water in the tub is important because of the relationship between the growth in active inventory in a given market, and the impact on prices. If you have growth in active inventory because homes are sitting on the market for longer, then those homes may necessitate a price cut in order to get some buyer interest.
Mark Fleming - Right and that can be tough. That's often why we consider house prices to be downside sticky. Homeowners would rather withdraw from the market then sell at a lower price. If your neighbor got $300,000 for their house when they sold, then you want to get at least that much for yours, right? Even if you're selling in a higher rate environment, a.k.a. a drain is closing environment.
Odeta Kushi - And this price stickiness is true of builders as well, because if they lower the price of one home in a development, it could set a precedent for future pricing of other homes in the same development.
Mark Fleming - Yes, but the longer your home is sitting on the market, the more likely that you might need to cut prices to get buyers in the door. And so -- surprise, surprise -- when we evaluate the data, and what economists wouldn't want to do that, we're finding that there's a strong relationship between markets that have high growth in active inventory -- basically the amount of water rising in the tub -- and where we see annual price declines or slower price growth.
Odeta Kushi - So picture a chart split into four quadrants. Okay, use your imagination. We're moving away from the bathtub into chart land. So a chart split into four quadrants with active inventory growth using Zillow data on the y-axis and nominal house price growth from First American Data and Analytics on the x-axis. Now markets that are in the upper left quadrant are where inventory growth is above average and price growth is below average. Now, when we do this across our top 50 markets, we find that the markets that fall into that quadrant, the upper left quadrant, are concentrated in the west and south. Notably the Sun Belt, has had more relative growth in inventory and below average price growth.
Mark Fleming - Okay, picturing, picturing in my mind's eye, yes. Okay, so these markets, the buyers are...Walking on sunshine...what? No, no, no?
Odeta Kushi - Great, great job. With that line, '80s reference achieved and added to the playlist. Moving on, moving right along to being economists and not singers. Now, some examples of these markets are Jacksonville, Tampa, Orlando and San Diego, but let's take Tampa as our example. Across the top 50 markets, the average annual active inventory growth in December across the top 50 markets was just over 18%, the average nominal house price growth was 3.6%. Now, in Tampa, nominal house price growth was negative 4.6%, below average, while active inventory growth was 26%, so above that average of 18%.
Mark Fleming - Got it and so now in the bottom right corner in my mind's eye, there are markets with above average nominal growth and below average active inventory growth, essentially the opposite. These markets are concentrated -- surprise, surprise -- in the Midwest and Northeast. Don't worry, we will publish a dashboard with all of this data and link to it in the script for this episode, so you don't have to do this in your mind's eye.
Odeta Kushi - So you can look up your own home market, right? We're just calling out a couple of key markets here, but the top 50 is all in there. So you can dig around the data and have some fun. Now, we find a similar pattern when we look at the relationship between active inventory growth and the average number of days that it took a home to go from listed to pending on Zillow. Average days to pending in December was just over 50. Back to our Tampa example, the average number of days to pending was 68 days, so above average.
Mark Fleming - And, on the contrary, it only took an average of 31 days for a home to go from listed to pending in Cleveland, this is a market with below average active inventory growth and above average house price growth.
Odeta Kushi - Now, there's also a positive relationship between markets with higher active inventory growth and the share of listing listings in that market with a price cut.
Mark Fleming - That's right, as we previously noted, most of the regions with growing inventories of homes for sale are in the Sun Belt and other metros that have seen more new homebuilding in recent years. Most regions in the Northeast and the Midwest have experienced little improvement in the number of homes available for sale, so no big changes in the inventory, in part due to fewer new homes being added to the housing stock in those places.
Odeta Kushi - That's right. And I should mention one more relationship here, that's the relationship between growth and active inventory and improvements in affordability. And I think, at this point, the reason should be pretty obvious. We measure affordability using our Real House Price Index, which adjusts nominal house prices for house-buying power. As a result, downward pressure on prices improves affordability, all else held equal.
Mark Fleming - So keeping with our Tampa example, affordability improved by nearly 18% on an annual basis in December, significantly higher than the average of the top 50 markets of a meager 0.7% improvement.
Odeta Kushi - Now, I know this is an episode all about local market dynamics, but I do think it's important that we mention what this all means for national house prices and affordability. Since that's usually what we see in the headlines anyway, right? So try to make some sense out of those numbers. In December, according to Zillow data, for-sale inventories nationally were up 18% from one year ago, though still 24% below December 2019 levels. Meanwhile, the pace of new listing growth has flattened and is only up about 1% compared to a year ago.
Mark Fleming - The faucet is about as open as a year ago, but the drain is more tightly closed. I had to bring back the bathtub.
Odeta Kushi - I was gonna say, listener, I'm sure you thought that we were done with that, but nope, we're hanging on to it tight. So active inventory is rising because demand has cooled and homes are taking longer to sell, rather than because of a surge in new listings. For example, the time it takes for a home to go from listed to pending has increased from 44 to 55 days over the course of the year.
Mark Fleming - So housing demand remains strained under the pressures of elevated mortgage rates and higher prices, while for-sale inventory has increased compared to last year's historically low levels. Sluggish demand combined with increasing supply is, of course, a recipe for cooling home price appreciation. However, the ongoing supply shortages writ large, puts a floor on how low house price growth can go. As a result, annual nominal house price appreciation will likely continue to remain positive, at least nationally, but return closer to the pre-pandemic historical average of around a low 3% level. Seems like a lot of things in the housing market are, quote, returning to normal.
Odeta Kushi - Yes, the Great Rebalancing, and with positive, but slower nominal house price growth, positive income growth and a little moderation in mortgage rates, we could see a little improvement in national affordability, but remember, we'll see more improvement in pockets of the country that have higher levels of active inventory growth.
Mark Fleming - Okay, so that's the relationship between prices and affordability. What about sales activity?
Odeta Kushi - Good question. Now, one unique factor about the housing market is that the seller and the buyer are, in many cases, the same. It's the existing homeowner. Because in order to buy a new home, you have to sell the home you already own and then find a new home to buy, but not just any home, one that you like better. So the fewer homes that are for sale, the harder it becomes to find a home better than what you already own. So a lack of inventory doesn't just prevent first-time home buyers from jumping into the market, but it also keeps existing homeowners staying put, and limiting existing home sales.
Mark Fleming - The opposite is also true. That makes the housing market very unique. Get it? Not surprising, since every house is also unique, right, right? According to Zillow's new listings metric, housing supply has increased in 37 of the top 50 markets we track on a year-over-year basis. In December, the growth in new listings is in Southern and Western markets, and more muted improvements are occurring in the Northeast and the Midwest. There's a strong positive relationship between increasing growth in new listings and improving sales. The more new listings, the more sales, the more listings to choose from, the easier it is to find something you like to buy, enhancing the options available to potential buyers, which helps drive market activity.
Odeta Kushi - Alright so, we'll stop picking on Tampa for a minute, and let's use another city as an example. Here in Seattle, new listings jumped nearly 13% on an annual basis in December, and sales improved annually by 17%. In New York, on the other hand, new listings were down 5.4% compared to a year ago, while sales fell 14.5%.
Mark Fleming - So, ultimately, we find that prices fall or price appreciation slows when the rising level of inventory is because of less demand relative to new supply, and sales increase when the rising level of inventory is because of more new supply relative to demand.
Odeta Kushi - That's a great summary. If home prices remain high, buyers may still hesitate to act unless mortgage rates come down. Affordability, after all, is a payment-to-paycheck calculation, and the numbers need to work, whether that's achieved through lower home prices, lower mortgage rates or higher incomes. But choice matters too. Our analysis shows that as new listings increase, buyers can more easily find a home better than what they already own, and that increases transactions. Okay, that was a lot of information, but I think the bottom line here is inventory is important for house prices, affordability and sales, and that varies by market. Real estate is local, after all. And that is the end of our episode. Thank you for joining us on this episode of the economy podcast. If you have an economics-related question you'd like us to feature in the future, you can email us at economics@firstam.com. And, as always, if you can't wait for the next episode, you can follow us on X. It's @OdetaKushi for me and @MFlemingEcon for Mark. Until next time.
Thank you for listening, and we hope you enjoyed this episode of The REconomy Podcast from First American. We're pleased to offer you even more economic content at firstam.com/economics. This episode is copyright 2025 by First American Financial Corporation. All rights reserved.
Mark Fleming - Walking on Sunshine. Oh yeah, walking on sunshine...
Odeta Kushi - You want to book Mark for your next event?
Mark Fleming - I really like that song, actually.
Odeta Kushi - Yeah, it's a good one.
This transcript has been edited for clarity.