The Great Stay: A Divided US Housing Market Emerges Post-Pandemic
The United States' housing market is currently experiencing a profound division, a phenomenon dubbed 'The Great Stay.' This situation has created two distinct real estate landscapes: one characterized by rapid home sales in the Midwest and Northeast, and another by significantly slower sales in the Sunbelt states. This geographical disparity is not merely anecdotal; it is reflected in tangible metrics such as the 'days on market' for homes. The underlying causes are multifaceted, stemming from a post-pandemic recalibration of migration patterns, escalating housing-related costs in traditionally popular southern regions, and an unusual stagnation in the labor market. This article explores the various dimensions of this divide, shedding light on why Americans are choosing to stay put and what implications this has for both buyers and sellers across the nation.
A recent presentation to a gathering of real estate professionals in Chicago underscored the dramatic contrast in housing market performance across the U.S. A map illustrating the average days properties spend on the market before going under contract revealed a clear split. Homes in the Midwest and Northeast are being sold much more quickly, often in about 50 days. In stark contrast, properties in the Sunbelt typically require around 100 days to sell. This divergence signifies a significant shift in market dynamics.
The primary driver behind this disparity is a dramatic slowdown in internal migration within the U.S. Historically, a consistent flow of people moved from northern states to the southern Sunbelt. This trend intensified during the pandemic, fueled by the rise of remote work, more affordable housing options, and new economic opportunities in states like Texas, Florida, Arizona, and Colorado. Millions relocated, seeking a change of pace and perceived better living conditions. However, this migration has largely ground to a halt.
The cost of moving south has become a major deterrent. Property values in many southern cities, such as Tampa, saw astonishing appreciation rates, sometimes as high as 45% within a few years. Concurrently, mortgage rates surged from approximately 2.8% to 7%, dramatically increasing monthly housing payments. Beyond purchase prices, the ongoing expenses of homeownership in the South have also climbed significantly. Insurance premiums have soared due to an increase in natural disasters and rising rebuilding costs, while property taxes have also seen increases. Even everyday household goods have become more expensive, collectively making the financial burden of owning a home in these regions substantially heavier.
In contrast, the Midwest and Northeast have proven less vulnerable to extreme weather events, helping to keep insurance costs relatively stable. As the economic advantages of relocating to the South diminished, the incentive for northern residents to move effectively disappeared. This has created an imbalance: in northern cities like Cleveland, inventory remains tight as fewer people are selling, while in southern areas like Sarasota, inventory has accumulated because fewer people are buying. This dynamic underscores the localized impact of 'The Great Stay' on housing availability.
The 'Great Stay' extends beyond the housing sector, intertwining with an unusual labor market situation. Despite a relatively low national unemployment rate, the rate at which companies are hiring remains remarkably sluggish, reminiscent of a deep recession. For instance, only 22,000 jobs were added in August, a figure that highlights a broader reluctance among employers to expand their workforce significantly. This cautious hiring environment has profound implications for worker mobility.
With limited hiring opportunities, individuals who are already employed in stable positions are less inclined to leave their current roles. The 'quits rate'—the proportion of employed individuals who voluntarily leave their jobs—is at an unusually low level, a pattern more consistent with an economic downturn than with robust growth exceeding 3%. Interestingly, the Northeast, which exhibits the fastest home sales, also records the lowest quits rate. This correlation suggests that job security plays a significant role in people's decisions to remain in their current locations.
Before 'The Great Stay,' many professionals might have confidently resigned from their jobs in cities like Chicago to seek new employment opportunities in growing markets such as Phoenix. However, the current climate of reduced hiring makes such moves far riskier. Consequently, individuals are choosing to remain in their existing jobs and homes, contributing to the overall stagnation in migration. This slow job market could be a residual effect of the extensive hiring that occurred during the pandemic, leaving many companies fully staffed. Additionally, the nascent impact of artificial intelligence on the economy, while difficult to quantify precisely, anecdotally appears to be influencing hiring decisions, further contributing to this cautious approach.
The current market trend, termed 'The Great Stay,' means a reluctance to sell properties in the northern states and a decreased demand for purchasing homes in the southern states. This phenomenon is evident in the accelerating accumulation of inventory and the increasing number of days homes remain on the market, particularly in the South. This north-south divide is also reflected in new construction data, which shows a higher rate of home building in the South compared to the North. Consequently, it's unsurprising that excess inventory is accumulating in areas with robust new construction. For instance, the Tampa metropolitan area now sees single-family homes averaging 94 days on the market, a significant increase from just 20 days in September 2021, with condos taking even longer at 122 days. In contrast, home sales in Connecticut average only 48 days, up from 35 days during the pandemic, illustrating the regional variations in market slowdown. This 'Great Stay' is a relatively recent development, with different markets experiencing the post-pandemic slowdown at varying paces, leading to the pronounced regional differences observed today.