US Housing Supply-Demand Balance Narrows While Price Pressure Builds

Executive Summary

This report is the fifth installment of Parcl Labs' US Housing Supply Demand Landscape, leveraging our real-time data and open-source Distressed Market Identifier Algorithm to find markets at risk of price declines across the top 100 US metros.

What's changed since our October report:

Algorithm flags fewest markets since series inception. Seven markets met our criteria of outsized YoY supply-demand gaps and above-national-average price cuts: Dallas, Orlando, Lakeland, Knoxville, Tulsa, Albuquerque, and newcomer Greenville. This list represents the lowest count since we began our analysis in June 2024, with six markets carrying over from last month.

Supply-demand gaps narrow significantly. The US gap decreased to 33.8% (from 40.3% last month), with supply (for sale inventory) up 21.3% YoY while demand (sales) is down 12.5%. Only 15 markets show gaps above 50% compared to 39 in September, suggesting many previously flagged markets are finding equilibrium at lower price points.

Regional improvement in Florida and Texas. While most major metros in these states have found relative supply-demand balance, Dallas, Orlando, and Lakeland continue to show significant imbalances despite the broader regional stabilization. The persistence of these gaps, even as neighboring markets adjust, suggests these areas are set up for further price declines. Notably, despite recent major hurricanes, we have not yet observed any major idiosyncratic impact on supply dynamics in affected Florida markets.

Price cuts intensify earlier than seasonal norms. The national price cut rate increased to 38.0% of for sale inventory (from 36.9% last month), with 46 markets exceeding this threshold. While price reductions typically increase heading into winter, this year's earlier onset and higher YoY levels suggest increased seller motivation. Among our seven flagged markets, Florida continues to show the highest absolute price cut levels (Orlando 44.6%, Lakeland 44.1%).

Parcl Labs continues to lead in real-time housing market research, with our API-based, algorithm-driven insights recently featured prominently in the Wall Street Journal's Florida housing coverage. Our open-source methodology underlying this report enables live monitoring and analysis - access it here.

Introduction

The U.S. housing market remains in a period of heightened uncertainty. Despite 75 basis points of interest rate cuts already implemented in 2024, mortgage rates remain stubbornly elevated, continuing to impact supply and demand dynamics across the nation. While national home prices are down just marginally from their all-time highs reached earlier this year, our analysis reveals significant regional variations in market conditions, with certain areas showing more pronounced signs of stress.

To shed light on this situation, we developed an algorithm based on the Parcl Labs API to identify markets at risk of price correction. Our previous reports generated via this algorithm garnered national attention. Most recently, the Wall Street Journal has made our findings a central part of its reporting on the Florida housing market.

Our analysis continues to focus on two key metrics: supply-demand imbalances and price cut trends, which have proven to be leading indicators of market shifts. Our algorithm's latest run identified 7 of the top 100 U.S. markets requiring attention—6 consistent from last month and 1 new addition. This report analyzes supply, demand, price cuts, and price performance across these markets. Let's examine the findings.

Supply-Demand Gaps Continue to Moderate

Our algorithm continues to reveal supply-demand imbalances across key U.S. housing markets. The national gap stands at 33.8%, with a 21.3% YoY supply (listings) increase against a 12.5% YoY demand (sales) decrease. This represents ongoing improvement from last month's 40.3% gap, suggesting a trend toward rebalancing.

For context, our algorithm identifies markets meeting two key criteria: a supply-demand gap exceeding 50% YoY and above-national-average price cuts. While seven markets featured in this report meet both thresholds, only 15 total US markets exceeded the 50% supply-demand gap this month—down significantly from 39 markets in September. This broad-based tightening suggests many markets are moving toward better balance on a YoY basis. Notably, several markets that previously showed severe supply-demand imbalances—such as Austin, parts of Florida, Phoenix, and Denver—are now showing signs of market adjustment as supply and demand dynamics realign around new (lower) price levels. This pattern is consistent with markets finding equilibrium during a period of correction. The algorithm's purpose is to identify the next wave of markets that may face similar price pressures.

That brings us to this month's 7 markets. Greenville, South Carolina now leads our monitored markets with an 80.3% gap, driven by a dramatic 71.6% surge in supply against an 8.7% decline in demand. This substantial imbalance warrants close attention as it significantly exceeds the national average and it also came on fast - this is the first month Greenville has flagged.

The remainder of our identified markets were also flagged last month and show gaps ranging from 50-58%:

• Dallas, TX: 58.3% gap (30.8% supply increase, 27.5% demand decrease)
• Albuquerque, NM: 51.7% gap (27.5% supply increase, 24.2% demand decrease)
• Lakeland, FL: 50.7% gap (35.4% supply increase, 15.4% demand decrease)
• Knoxville, TN: 50.6% gap (42.9% supply increase, 7.7% demand decrease)
• Orlando, FL: 50.5% gap (38.8% supply increase, 11.8% demand decrease)
• Tulsa, OK: 50.5% gap (35.5% supply increase, 15.0% demand decrease)

Florida and Texas present an interesting dynamic - while many markets across both states previously showed significant imbalances, most are now adjusting as supply and demand realign around new lower price levels. This context makes Lakeland, Orlando, and Dallas particularly notable, as they continue to show persistent supply-demand imbalances while their regional peers stabilize. Despite concerns following two major hurricanes in Florida, as of October 2024 we have not yet seen hurricane impacts create any major idiosyncratic impact on supply across affected markets in the state.

Price Cuts Rise Nationally; Florida Maintains Highest Levels

Supply-demand imbalances signal potential market stress, but price behavior ultimately depends on seller motivation to find market clearing prices through reductions. Our algorithm identifies markets where price cut activity (percent of inventory with price cuts) exceeds the national average. The US average price cut rate increased to 38.0% as of November 11, up from 36.9% last month, with 46 markets exceeding this threshold compared to 45 last month. This sustained and expanding price cut activity, even as supply-demand gaps narrow nationally, suggests sellers in many markets are increasingly motivated to transact before the traditional holiday slowdown.

Among our seven identified markets combining high supply-demand imbalances with elevated price cuts, Orlando leads with 44.6% of inventory showing price reductions (down from 45.4%), followed by:

• Lakeland, FL: 44.1% (down slightly from 45.2%)
• Dallas, TX: 42.4% (up from 41.1%)
• Tulsa, OK: 42.3% (down slightly from 43.0%)
• Knoxville, TN: 42.3% (up slightly from 42.1%)
• Albuquerque, NM: 40.3% (up sharply from 37.2%)
• Greenville, SC: 40.1% (up sharply from 37.1%)

Two markets show notably sharp increases in price cut activity: Albuquerque and Greenville, both jumping about 3 percentage points (to 40.3% and 40.1% respectively), while Florida markets maintain the highest absolute levels with Orlando at 44.6% and Lakeland at 44.1%. However, both Florida markets have moderated slightly from last month's levels.

The persistence of elevated price cut activity in these markets, combined with their significant supply-demand imbalances, suggests continued vulnerability to price adjustments. In the next section, we'll examine how these market pressures are translating into actual price performance.

Flagged Markets Show Varied But Universal Price Declines

Our analysis of supply-demand imbalances and elevated price cuts naturally leads to the critical question: Are these market pressures translating into actual price changes? The data suggests early signs of price response in the 7 markets, particularly in markets with persistent imbalances. Most notably, October marks the first month where all 7 markets flagged by our algorithm showed month-over-month price declines.

Lakeland and Dallas show the most significant adjustments, declining -4.4% and -3.9% from their peaks respectively, despite both markets maintaining substantial appreciation since March 2020 (Lakeland +50.8%, Dallas +46.0%). Tulsa has declined -3.8% from peak while remaining up 44.6% since 2020.

Greenville, our newest market of concern, has already dropped -2.1% from peak (though still up 49.1% since 2020). The remaining markets show more modest declines: Albuquerque (-2.0% from peak, +52.7% since 2020), Knoxville (-2.4%, +72.6%), and Orlando (-0.1%, +56.6%).

These price movements suggest that sustained supply-demand imbalances and elevated price cuts are beginning to impact values, though the magnitude varies by market. Notably, even markets showing larger price declines maintain substantial appreciation since the pandemic's onset, highlighting the considerable pricing cushion built up during the past four years.

Table: Change in Distressed Markets

Signal From Real-Time Price Feeds:

We have real-time price feed coverage for several key markets, enabling us to analyze trends through November 14. In the past two weeks:

• Dallas recorded a 0.47% increase in home values
• Lakeland, FL saw a 0.47% increase
• Orlando, FL experienced a more pronounced 0.57% increase
• Nationally, home values rose by 0.46%

These figures highlight the dynamic nature of current market conditions. Track these trends in real-time using the Parcl Labs API price feeds.

Conclusion

Our algorithm identified 7 markets exhibiting significant supply-demand imbalances and elevated price cuts, down from 17 last month. While many previously flagged markets are showing signs of stabilization, this month's analysis reveals an important shift: all currently monitored markets experienced month-over-month price declines.

This transition from early warning signals (supply-demand gaps and price cuts) to actual price movements validates our algorithmic approach and underscores the importance of granular, real-time monitoring. The Parcl Labs API's ability to track these metrics across supply, demand, and price dynamics remains critical for identifying markets at risk of price corrections before they materialize.

Methodology (Appendix)

Methodology is completely open source. Review, run it, and build on it here.

Data Source and Market Coverage

• Primary data source: Parcl Labs API
• Property types: All residential properties, including single-family homes, condos, townhouses.
• Geographic scope: 100 largest U.S. metropolitan areas by population

Algorithm Structure

1. Supply-Demand Divergence Analysis
   • Calculate monthly year-over-year (YoY) percentage change for:
     • Supply: Total for-sale inventory
     • Demand: Number of completed sales transactions
   • Apply 3-month moving average to smooth short-term fluctuations
   • Compute supply-demand change differential
   • Select markets meeting both criteria:
     • Minimum volume threshold: ≥500 sales AND ≥500 for-sale inventory
     • Supply-demand gap: >50% (supply change exceeding demand change)
2. Price Cut Activity Filtering
   • Calculate percentage of inventory with price cuts for each market
   • Apply 3-week moving average to price cut percentages
   • Compare each market's moving average to the national benchmark
   • Select markets exceeding the national average price cut percentage
3. Market Risk Identification
   • Combine results from steps 1 and 2 to identify at-risk markets
   • Analyze additional metrics for comprehensive assessment:
     • New construction impact: % of new listings from new construction
     • Price change trends: Time series of % inventory with price reductions
     • Home value appreciation: % change in home values since March 2020

Price Performance Analysis

• Monthly analysis: Median price per square foot of sales in each metro (August 2024)
• Real-time analysis: Daily price feed data for markets with available feeds

Methodological Notes

• All percentage changes and moving averages are calculated using consistent time periods across markets
• The algorithm adjusts for market size and activity level through volume thresholds
• Price cut moving averages smooth out weekly volatility for more reliable trend identification. We also conduct an additional outlier revision to weed out markets with unusual shifts.
• The methodology captures both long-term trends (since pandemic onset) and current market conditions

This methodology provides a robust framework for identifying markets with significant supply-demand imbalances and elevated price cut activity. By incorporating multiple data types, property categories, and analytical approaches, it offers a comprehensive assessment of market dynamics and potential risks in the U.S. residential real estate market.