Map Reveals Cities Where Home Sales Are Soaring

Zillow reports that home sales are rebounding fastest in Southern and Midwestern metros with restored inventory, led by Austin at +20% year over year and inventory 52% above pre-pandemic averages. Several Texas and Sun Belt markets posted solid gains, while Northeast metros such as New York (-8.7%) and Pittsburgh (-8.3%) continued to see declines amid tighter supply. Nationwide inventory remains 18.7% below pre-pandemic norms and new listings are still 16% below 2018-2019 averages, but affordability has improved in some Sun Belt cities, including Austin where typical mortgage payments fell 9.8% year over year.

Analysis

The important signal is not that housing is broadly healthy; it’s that the market is fragmenting into a supply-normalization story versus a true demand recovery. In the Sun Belt and parts of the Midwest, the combination of restored inventory and easing monthly payment burden is pulling forward transactions that had been delayed, which should support local brokers, title, moving, home-improvement, and regional banking fee streams over the next 1-2 quarters. The second-order effect is that these metros can absorb new-home supply faster, which is bullish for builders with land banks in affordable growth markets and bearish for owners of scarcer coastal housing where affordability remains a demand brake.

The loser set is more subtle: markets with persistent shortage are not necessarily strong enough to offset affordability drag, so transaction volumes can stay weak even if prices remain sticky. That means the real risk to the “housing is stabilizing” narrative is that lower rates do not fully translate into affordability if insurance, taxes, and non-housing costs stay elevated; in that case, volume-led beneficiaries underperform while price-supported homeowners look fine on paper but do not generate velocity. Watch for any reversal in mortgage-rate momentum because this trade is much more sensitive to transaction volume than to home-price direction.

From a positioning standpoint, this is a better relative-value than outright beta trade. The upside is clearest in builders and housing-adjacent services exposed to high-turnover Sun Belt markets, while coastal REITs and brokers face a slower volume backdrop. Over 3-6 months, the setup favors a long/short basket that captures regional dispersion rather than a blanket long housing view, since the national market still lacks enough supply for a broad-based cyclical breakout.

The contrarian takeaway is that improving sales in inventory-rich metros may actually be a sign of normalization, not a new bull leg: once pent-up demand is absorbed, sales growth can flatten quickly unless income growth re-accelerates. In other words, this is likely a 2025-26 volume reset story, not a durable multi-year acceleration, and consensus may be overestimating how much of this improvement can persist without a meaningful easing in borrowing costs.

Key Decisions for Investors

• Go long LEN / DHI on a 3-6 month horizon; prefer the builders with the highest Sun Belt exposure and strongest land inventory in affordable metros. Risk/reward: 1.5-2.0x upside if transaction volume keeps improving, with downside limited by already-depressed sentiment, but trim if mortgage rates back up 50 bps or more.
• Pair trade: long PHM or LEN vs short a coastal-exposed housing proxy or regional transaction-sensitive financials with weaker inventory normalization. The edge is regional dispersion: inventory-rich metros should keep outperforming on closings while constrained markets lag; target 10-15% relative spread over two quarters.
• Buy calls on FND or HD expiring in 4-6 months as a second-order beneficiary of turnover returning to previously frozen markets. This is a cleaner expression than homebuilders if you want volume leverage without single-market land risk; max loss is premium, upside improves if spring/summer turnover stays firm.
• Avoid chasing broad home-price exposure; instead, use any strength to fade names dependent on continued price appreciation rather than turnover, especially where affordability remains stretched. If 30-year rates fall another 50-75 bps, reassess, because the trade becomes a national beta trade rather than a regional dispersion trade.