We're all arguing about a housing freeze that's already thawing

[David Walters]

There's a debate I keep seeing in here and everywhere else: do we have a supply problem (build more) or an affordability problem (millions of homes locked up by 3% mortgages)? I pulled national listing data to settle it for my own underwriting, and the answer surprised me — both sides are right, just about different years.

2022–2023 was a real freeze. New listings ran negative year-over-year for seventeen straight months, bottoming near −29%. The tell that this was lock-in and not a shortage: absorption fell at the same time. If demand were eating supply, absorption spikes. It didn't. Sellers just stopped listing. The lock-in crowd was right about that stretch.

But look at now. Active inventory has rebuilt from a frenzy-era low around 660K listings back over 1.1 million — and absorption kept sliding the whole way down to multi-year lows. Inventory is coming back and buyers still aren't biting. The constraint moved off the supply side and onto the demand side. The freeze is melting, and what's underneath it is an affordability ceiling, not a shortage.

The part that actually changed how I look at markets: unaffordability doesn't track tight supply at all. Across ~389 metros, the least-affordable markets were more common in balanced-supply metros than tight ones. You can't predict whether a market is unaffordable by looking at how tight its inventory is. They're nearly independent.

And the expensive job-center metros everyone calls "locked"? Split decision. Some are still tight, others are restocking fast year-over-year. There's no single national read — it's market by market, quarter by quarter.

The practical takeaway for me: stop treating "supply vs. affordability" as one national debate. Figure out which one is actually binding in the specific market you're underwriting, this quarter. For a lot of the country, that flipped about a year ago.

Here's my honest gap, and where I'd want operator input: listing data shows me the symptom — inventory rebuilding while demand fades. It doesn't tell me whether that's price-sensitive buyers waiting out rates, or something structural in a given market.

For those of you actually transacting right now — in your market, is the slowdown buyers who can't afford it, or buyers who are choosing to wait? What are you seeing on the ground that the listing numbers can't show me?

- David

[J Castro]

Great analysis. From what we’re seeing on the lending side, the answer varies by market, but affordability is becoming a much bigger factor than inventory in many areas.

A lot of buyers aren’t necessarily choosing to wait—they simply don’t qualify for the same purchasing power they had a few years ago. Higher rates, insurance costs, taxes, and overall living expenses have compressed affordability even for well-qualified borrowers. At the same time, sellers are slowly accepting that the market is no longer pricing assets the way it did in 2021-2022, which is helping inventory rebuild.

That said, there is also a segment of buyers and investors sitting on the sidelines waiting for either rates to decline or pricing to soften further. The challenge is that if rates move down materially, demand could return quickly and put upward pressure on prices again.

For investors, this is why market-specific underwriting is more important than ever. We’re spending less time looking at national narratives and more time evaluating local absorption, rent growth, employment trends, and realistic exit assumptions.

I think your point about affordability and supply being separate variables is spot on. In today’s environment, understanding which constraint is actually driving a specific market can be the difference between a great investment and a costly mistake.