Housing market inventory is so tight that only one of the nation’s 100 largest markets saw a home price decline in May

At the height of the housing correction last fall, 92 of the nation’s 100 largest housing markets tracked by Black Knight saw a month-over-month home price decline in October. At the time, many economists thought it was the start of a housing market reckoning, or as Fed Chair Jerome Powell put it last fall, a “difficult [housing] correction.”

However, to the dismay of some homebuyers, the housing market has shown a great deal of resilience through the first half of 2023. House prices have firmed up—fast.

On Friday, we learned that only one of the nation’s 100 largest housing markets tracked by Black Knight, a leading provider of financial/mortgage software, saw a month-over-month home price decline in May. The other 99 markets saw a home price increase. Nationally, seasonally adjusted house prices rose 0.71% between April and May.

Andy Walden, VP of enterprise research strategy at Black Knight, tells Fortune that tight inventory levels stabilized the national housing market once it entered into its seasonally strong window this spring.

“Though demand has suffered under the weight of home affordability at near 37-year lows, the persistent lack of available inventory continues to push home prices higher this spring, despite Fed efforts to cool the market by raising rates,” Walden tells Fortune.

In other words, the home price correction spurred by last year’s mortgage rate shock had a limited runway given how tight housing inventory levels remain.

The biggest one-month gains were found in Midwestern and East Coast markets such as Madison (+1.65%), Hartford (+1.58%), and Milwaukee (+1.41%). Not too far behind were markets like New Haven (+1.37%), Bridgeport, Conn. (+1.28%), and Allentown, Pa. (+1.25%). Unlike overheated Western markets, which were hit harder by last year’s correction, these Midwestern and Northeastern markets didn’t see prices spike as high during the pandemic housing boom and were better positioned to weather the storm.

Among the 100 largest markets tracked by Black Knight, only Austin (–0.33%) saw a seasonally adjusted home price decline between April and May.

The unifying characteristic among markets hard-hit by last year’s correction is strained housing fundamentals, specifically a wider-than-average gap between local house prices and local rents. That was specifically true in Austin, where a particularly big pandemic housing boom saw local prices get, well, bubbly. According to Moody’s Analytics, Austin home prices were “overvalued” by 63.7% at the height of the boom in the first quarter of 2022. Anything above 25%, Moody’s considers “significantly overvalued.“

Those strained fundamentals, coupled with investor speculation and robust homebuilding levels, pushed Austin into correction mode. (Despite the correction, Austin home values are still up over 40% since March 2020.)

Among the 100 largest markets tracked by Black Knight, 39 housing markets ended May at a house price level that remains below their 2022 peak price. Meanwhile, 61 markets are back—or above—their 2022 peak. That’s a big shift from February, when 75 major housing markets were below their 2022 peak price and just 25 markets were back—or above—their 2022 peak.

The markets where home prices are down the most since the peak include places like Austin (–13.78%); Boise (–9.78%); Phoenix (–9.58%); San Francisco (–9.28%); Las Vegas (–8.71%); Seattle (–8.51%); Ogden, Utah (–7.78%); and Provo, Utah (–7.51%).