Cotality showing a ‘rebalance’

The key market implication is not simply softer housing prices; it is a tightening feedback loop between mortgage rates, transaction volumes, and regional labor mobility. If rates stay elevated through the spring, housing stops acting as a wealth-effect tailwind and instead becomes a drag on consumer discretionary spending, relocations, and construction-related payrolls. That creates a second-order headwind for lenders, home-improvement retailers, brokers, title insurers, and regional banks with concentrated exposure to fast-cooling Sun Belt markets.

The divergence across geographies matters more than the national average. Strength in the Midwest/Northeast suggests capital and employment are migrating toward lower-cost, higher-wage corridors, which is structurally supportive for industrial, infrastructure, and healthcare ecosystems in those states. At the same time, Florida’s persistent weakness is a warning sign for insurance-sensitive housing markets: falling prices can pressure collateral values just as property insurance, HOA, and financing costs remain sticky, raising default and refi risk over the next 6-12 months.

The biggest contrarian point is that overvaluation is still broad even as pricing momentum fades. That means the market may be underestimating the risk of a slow-burn repricing rather than a clean correction: less liquid, overvalued metros can sit flat for months before selling starts to gap down. If mortgage rates retrace quickly, there is upside in the more affordable northern metros first; if not, the current setup favors a continued rotation away from housing-adjacent cyclicals and into regions/sectors benefiting from domestic reindustrialization and migration.