“Hot and Cold: Contrasting Real Estate Markets in North and South America”

The current state of the real estate market in the United States presents a dichotomy of “fire and ice.” In the previously booming southern regions where new housing construction was in full swing, a surge in inventory has left homebuilders in a predicament, forcing them to introduce price cuts and incentives. This scenario has even led some experts to draw parallels to the situation back in 2008. On the flip side, in the northeastern and central-western regions of the U.S., inventory remains tight, and home prices continue to rise.

In the southern states such as Florida, Texas, and the western mountain region, the previous frenzy of housing construction has resulted in a dramatic increase in inventory. According to a report by Newsweek, real estate analyst Nick Gerli revealed that as of February 2025, housing inventory in Florida had surged by 33.9% year-on-year.

Gerli cited factors such as an increase in new listings, rising insurance and HOA fees, and a decrease in the number of out-of-state migrants as leading to a decline in demand, consequently causing home prices to drop. For instance, home prices in Punta Gorda saw an 8.3% year-on-year decline. It is projected that overall home prices in Florida are expected to drop by 5% in 2025.

In contrast, the northeastern and central-western parts of the U.S. continue to face tight inventory conditions, with home prices steadily climbing, unaffected by any surplus, highlighting significant regional disparities between the north and south.

To clear inventory, southern homebuilders have resorted to aggressive sales tactics. Near Tampa, Florida, Gerli captured a sales sign at a development called “LGI Homes” stating, “New homes! Zero down payment!” Data from the real estate website Zillow shows that the company currently has over 20 completed homes for sale priced between $286,000 and $383,000, offering various incentives such as 0% down payment loans and lease-to-own schemes to facilitate the next phase of construction.

In addition, major builder Lennar has introduced a 13% sales incentive mechanism, the highest in a decade. Gerli pointed out that this situation “closely resembles the peak scene before the collapse of the 2007 housing bubble.”

Why has the situation come to this? Following the subprime mortgage crisis in 2008, there was a severe shortage of housing construction in the U.S., leading to prolonged low inventory levels. The post-pandemic surge in demand drove home prices up. As a result, builders started construction projects at a rapid pace.

However, the favorable conditions did not last. The spike in interest rates in 2022 weakened purchasing power, causing many buyers to adopt a wait-and-see approach. Recent speculation about the Federal Reserve’s interest rate cut in 2025 has yet to yield clear results, keeping many buyers on hold as they eagerly await a reduction in mortgage rates before making a move. These factors have contributed to the backlog of inventory in the southern states.

Unlike the crisis in 2008, builders this time have not significantly reduced production. The current annualized new housing construction rate in the U.S. stands at 1.1 million units, higher than pre-pandemic levels, mainly concentrated in the southern regions.

Conversely, the situation in the northeastern and central-western regions of the U.S. is starkly different, with scarce inventory supporting healthy price increases. Gerli analyzed that the distribution of housing construction in the mid-2000s was relatively even, but it has now shifted towards the south, exacerbating regional imbalances. Southern buyers hold the upper hand, forcing sellers to lower prices, while in the north, demand outstrips supply, allowing sellers to maintain firm positions.

This regional disparity not only impacts market supply and demand but could also have national economic implications. The U.S. real estate market is facing hidden risks due to high interest rates and regional imbalances. While southern builders are alleviating pressure through incentives and lease arrangements, uncertainty surrounding ongoing construction and future tariff policies clouds their outlook.

Some experts suggest that the increased cost of Canadian lumber due to Trump’s tariff threats may hinder the commencement of new housing projects. Gerli cautioned that if the oversupply situation in the south worsens, it could serve as a warning sign for the entire country, potentially triggering economic chain reactions, and the temporary tranquility in the north may not last. The division between the north and south markets is testing the resilience of the housing market, and the dual dynamics of “fire and ice” are likely to persist in the foreseeable future.