“House price inflation is 6% nationally, but that masks a lot of regional variation,” Capital Economics economist Thomas Ryan wrote in an analysis earlier this week. Metropolitan areas such as Allentown, Phila.; Bridgeport, Conn.; Rochester, N.Y.; San Diego; and Los Angeles have all seen their home values rise by double digits (with the exception of the latter, although it’s pretty close). “Conversely, price growth is lackluster, or in some cases even negative in the Sunbelt markets which thrived after the pandemic,” he continued, pointing to Cape Coral, Fla.; New Orleans; and Austin. 

Separately, earlier this summer, an analysis from Redfin found that home prices were falling in four major metropolitan areas across the country from a year earlier; three were in Texas. Another found that housing markets in western Florida were cooling faster than anywhere else in the country. 

But it isn’t that people in these metros aren’t having kids or that they’re losing steam following their hot pandemic days; it’s supply.  Developers have been feverishly building homes to meet wildly hot demand—and that’s exactly what’s happened. In the spring, it was announced that J.P. Morgan would finance roughly 35 build-to-rent communities across the Sunbelt, totaling $770 million. In the South, according to Capital Economics, four times as many houses have been built in the last three or so years than in the Northeast. And the wave of new supply in the Sunbelt has tipped the scale to favor buyers, Ryan said.

“Significant homebuilding in the Sunbelt region over the past three years has restored housing inventory to pre-pandemic levels, which is why house prices there have stalled,” Ryan wrote. “In contrast, markets in the Northeast and California, which haven’t seen the same level of new construction and where inventory remains historically low, are experiencing double-digit house price inflation.”

It’s a tale as old as time. Urban economists, housing policy analysis, and real estate executives have long stressed that the key to pushing home prices and rents down is building more homes. The country is missing millions of homes, but obviously there are places where the shortage is more acute. California has become a de facto ground zero for the country’s housing crisis: It accounts for almost half of all unsheltered people in America and its home prices and rents far outpace typical states. The answer is clear: There aren’t enough homes. Therefore, prices are still rising because of low levels of inventory. 

Consider this: in Los Angeles, the average home value is about $973,000, and it’s up almost 6% from a year earlier. In Austin, the average home value is about $545,000, but it’s down more than 4% from last year, per Zillow.

“In Northeastern metros with the fastest-rising house prices, inventory remains 60%–70% below pre-pandemic levels,” Ryan wrote. “Californian metros show similar low inventory and strong price growth. In contrast, in Sunbelt markets where house prices are weakest, particularly in Texas, Florida and Louisiana, inventory is back at, or even above, pre-pandemic levels.” 

So why the difference in inventory? Several reasons, but mostly, it’s much easier to build in the Sunbelt than anywhere else. Last year, Texas built more homes than any other state in the country. Moreover, its top three metros by housing starts built 300% more homes than California’s, even though their populations are smaller: Dallas, Houston, and Austin built roughly 93,600 homes last year; to compare, Riverside, Sacramento, and Los Angeles built a total of 23,400 homes. 

Since January 2021, according to Capital Economics, more than 2 million single-family homes have been built in the South “as homebuilders responded to the population and house price boom,” Ryan wrote. “This is more than four times the number of single-family homes completed in the Northeast, where stricter zoning requirements and limited availability of land have constrained new construction.”

Newly built homes make up between 20% and 40% of home sales in Texas, Florida, and Louisiana metros, he explained; it’s much fewer in the Northeast. There’s the lock-in effect, too, which constrains existing supply because homeowners refuse to sell for fear of losing their low mortgage rates; it’s especially prevalent in California coastal markets, compared to Florida and Texas, both filled with older baby boomers who are mortgage-free, as Zillow has found. 

But the Sunbelt’s falling or flatlining home prices won’t last forever if Capital Economics is correct when it suggests a reversal in trends will occur.

“The Sunbelt will continue to attract strong economic immigration, so the current excess housing supply should quickly get absorbed,” Ryan wrote. “And with new construction already falling in the region, excess supply should be less of an issue down the line. Therefore, we expect house prices in the Sunbelt to recover. Indeed, in places like Austin, Dallas, and Jacksonville, it appears the worst is already over.”

Not to mention, his team suggests, once the housing world normalizes and the lock-in effect eases, home prices will ease, too, even in the Northeast and California. We’ll see if that happens.