The "housing shortage" narrative is falling apart in real time, and the data is starting to look worse than 2008. If you're a buyer, seller, or investor, especially in the Sunbelt, here's what's actually happening and how to make an informed decision.
New home sales are sinking in the middle of busy season
Start with the headline number: monthly U.S. new single-family home sales have dropped hard, down to roughly 51,000 in May. That matters because May is supposed to be peak season. Buyers get tax refunds in February, start shopping in spring, and want to be settled before school starts in August. May, June, and July are the busiest months of the year.
This busy season isn't busy. And the comparison that should get your attention: back in May 2008, new single-family sales were around 49,000. We're at 51,000 today. That is not a wide gap. We're seeing real weakness heading into the strongest part of the year, which means the back half of 2026 is likely to get tougher for builders, not easier.
Bill McBride of Calculated Risk, the analyst who called the 2008 crisis, pegged new home sales at a 580,000 annual rate in May. That's very low, and it's happening even with builders offering incentives worth as much as $50,000 in rate buydowns.
Builders overbuilt the Sunbelt, and the migration didn't show up
Here's the core of the problem. Builders bet that the 2020 to 2022 migration wave would continue forever, so they kept building, especially across the Sunbelt. It didn't continue. Florida is the clearest example: net migration that used to run around 300,000 people a year has collapsed to roughly 22,000 net migrants in 2025.
Builders miscalculated demand, and that left them sitting on a glut of supply. The result is falling prices. One large builder (Lennar) has shown roughly a 25% drop over four years. Imagine being the buyer who paid $491,000 in 2022 and is now worth $100,000 to $120,000 less after net incentives, while phase 2, 3, and 4 of the same community keep undercutting you.
Builders respond in a predictable order. First come the financial incentives, rate buydowns and closing-cost help, because they'll do almost anything before cutting the sticker price. But once incentives stop working, the price cuts come. We're now watching that second stage begin across the board. I dug into one example of exactly this in builder panic and the 22% price drop.
The "shortage" was never a shortage, it was a demand shock
We keep getting pitched a housing shortage by economists and media. It isn't real. In 2019 there was no shortage of homes. What happened next was a demand shock: ultra-low interest rates in 2020 triggered massive speculation and a wave of migration to the Sunbelt. That shock pulled roughly ten years of demand forward into about three years, and now we're living in the demand gap on the other side.
The data backs this up. According to the U.S. Census Bureau, the month's supply of new single-family homes at the current sales rate is already above 10 months. You cannot have a housing shortage and a 10-month supply of new homes at the same time.
What we actually have is a mismatch. Builders overbuilt luxury and premium price points ($750K to $1M) because the margins are fatter, and underbuilt starter homes (under $450K) where buyers actually need inventory. Layer on a backlog of new houses that haven't even broken ground yet, and the "shortage" story falls apart completely. Always ask where the data is coming from. Much of the shortage narrative is effectively paid media from title companies, mortgage companies, and builders who need you to keep believing it, which is the same dynamic I broke down in the 80% housing shortage mistake.
Affordability is worse than the 2006 bubble peak
All of this sits on top of an affordability crisis that's still getting worse. By the standard measure, the monthly mortgage payment on a median U.S. home relative to wages, buying a house today is less affordable than it was at the 2006 bubble peak. Wages simply have not kept up with home prices or inflation, a theme I covered in depth in the 2026 housing affordability crisis.
The anchor is mortgage rates stuck around 6.5%. They've stayed sticky even as the 10-year Treasury has fallen and oil prices have come down, because investors increasingly view mortgage-backed securities as riskier than Treasuries, keeping the spread elevated. On an inflation-adjusted basis, home prices are now well past the 2006 bubble. It's hard to look at that chart and conclude we're not in a bubble.
And the hidden costs of ownership have exploded, the expenses that rarely get factored in at purchase: emergency repairs up about 175%, home maintenance up about 85%, insurance up about 72%, plus rising property taxes, interest, and principal. Total housing cost is now eating about 39% of the typical household's budget, versus the classic 28% rule. That's roughly 11 points over the line, a clear signal something has to give.
Record equity won't save the market, it's what a top looks like
U.S. homeowner equity sits around $36 trillion, and plenty of people argue that cushion is why housing can't crash. That's backwards. Record equity is exactly what the market looked like in 2006, right before it cracked. The buyers from 2022 to 2025, three years of purchases made at the hardest part of the cycle, are the ones most at risk of going underwater.
That dynamic is freezing the market. Sellers won't sell because they don't want to give up their low locked-in rate and they're watching prices soften. Buyers can't buy because they don't earn enough and prices are too high. Transactions have slowed to near Great Financial Crisis levels, and demand is just as soft.
Demand is near record lows: a buyer shortage, not a seller shortage
Home-buyer demand is hovering near Great Financial Crisis levels, down roughly 37% from the peak. Pending home sales have rolled over to the lowest levels since 2009, and locally we're seeing pending sales down 23 to 24%. Active inventory is up, price cuts are accelerating to 30 to 40% of listings in some weeks, homes are sitting longer, and builder incentives keep stacking.
So this isn't a seller shortage. It's a buyer shortage: there are more sellers than buyers right now. Expect that gap to keep widening until sellers give up on price, which is what eventually pulls buyers back in. At this point in the cycle, buying is often about 50% more expensive than renting a similar home, and rents are softening too. In markets with heavy new construction, buyers and renters hold the power. We unpacked this same flip in there is no housing shortage, there is a buyer shortage.
Florida and the Sunbelt are leading the correction
Corrections are already showing up. Austin has corrected the most, fitting, since it boomed the most. Former boom markets like Indianapolis, Orange County, Chicago, Philadelphia, Charlotte, Raleigh-Durham, and Atlanta still screen as overpriced. Nationally, estimates put the market around 26% overpriced. Direction matters more than the exact magnitude here, but the direction is clear.
Florida is especially exposed. After a massive post-2020 runup driven by zero rates and migration, nearly every Florida metro is now turning negative. The structural problem is a thin middle class: a large share of buyers are retirees, while locals are largely priced out. As one analyst (Mike Green) frames it, $136,000 is the new "poverty-level" income in many high-cost areas once you account for taxes and expenses without qualifying for assistance.
The consumer is maxed out, and it's reshaping how people live
Behind the charts is a stretched consumer. The median age of all home buyers has climbed toward 60, up from closer to 30 a generation ago. People are delaying everything, first homes, marriage, kids, because it's all too expensive. The share of adults under 30 who are married with children has reportedly fallen from around 50% to roughly 12% over the past 40 years.
More adult children are moving back home to save money, and the generational script has flipped: older generations are increasingly supporting younger ones. A Veterans United survey found roughly 6 in 10 parents are helping their kids buy homes, commonly contributing $25,000 to $100,000, often as gifts. If you're fortunate enough to get that help, the worst thing you can do is take it and overpay at the top, negotiate hard and protect that equity.
Meanwhile, even with the stock market at record highs, consumer sentiment is poor. Households are loaded with debt and worried about job loss. You can't sustain a housing market without a confident consumer, and right now the consumer doesn't feel good, sentiment that's getting worse, not better, month over month.
Sellers are "rage quitting" and turning into accidental landlords
Frustrated sellers who can't get their price are pulling listings, "rage de-listing," and converting to rentals or simply staying put. That floods the rental market with accidental landlords, which pushes rents down, which makes renting even more attractive than buying, which pushes purchase demand lower still. It's a self-reinforcing loop that grinds worse each month.
The lock-in effect compounds it: with so many owners unwilling to surrender low rates, U.S. home turnover is at its lowest in decades, per Redfin. People aren't moving, the math no longer works.
The one chart that matters: 40 years of falling rates is over
Here's the takeaway to sit with. For roughly 40 years, the 30-year fixed mortgage rate fell, and that steady decline is a big reason asset prices climbed for decades. The question is simple: what happens when rates stop falling and start rising?
We live in a payment economy. When higher payments fight against decades of financial gravity, prices eventually have to correct, especially where builders overbuilt. If migration trends keep sharpening, specific Sunbelt markets could move from a correction into something closer to a crash. This is my analysis, not a promise.
This will likely be a negative year for real estate, and the pain probably isn't over. We may be near the beginning of it.
What this means for buyers, sellers, and investors
Buyers: You have leverage you haven't had in years, particularly with builders heading into their fiscal year-ends in September, October, and November, when the biggest incentives land. But only buy if you'll stay 10 to 15 years and you negotiate hard. Look at real estate on a micro, neighborhood level, national averages hide everything that matters.
Sellers: Price softening is real and likely to continue. If you need to sell, getting ahead of the market beats chasing it down. Pulling the listing and renting it out is a choice, but understand you may be joining a growing wave of accidental landlords competing on rent.
Investors: Affordability, demand, and supply are all flashing caution in the Sunbelt. Underwrite conservatively, assume further price weakness, and don't count on a quick rebound.
Need a top agent who actually understands your market?
About 80% of agents don't truly understand what's happening in their own market right now. The top ones do, and they're the ones who drive real value and help you save a fortune, especially when negotiating with builders. If you want help with your specific situation or an introduction to a top agent in your area, reach out, email jon@movewithmomentum.com or call (904) 351-6461, and a real person follows up within one business day.
This article summarizes Jon Brooks's market commentary and includes his personal forecasts and opinions. It is for general informational purposes only and is not financial, investment, legal, or tax advice. Market projections are inherently uncertain and are not a prediction for any specific property. Real estate conditions vary by market, always do your own research and consult a licensed professional about your situation.