For years, the American housing market has been defined by a single, frustrating reality: not enough homes for sale. That era is ending, at least in parts of the country. New analysis reveals that 17 states have now returned to or exceeded their pre-pandemic housing inventory levels, marking a fundamental shift in the supply-demand dynamics that drove home prices to record highs.

But this "Great Rebalancing" is far from uniform. While the South and West are seeing inventory surge, the Northeast and Midwest remain supply-constrained—creating a bifurcated market with dramatically different implications depending on where you live.

The States Leading the Recovery

The most dramatic inventory increases over the past year have occurred in:

  • Maryland: 34% inventory increase year-over-year
  • North Carolina: 34% increase
  • Virginia: 27% increase
  • Nevada: 27% increase
  • Arizona: 23% increase

These states share common characteristics: they experienced massive pandemic-era migration influxes, aggressive new construction, and are now seeing normalization as remote work flexibility wanes and insurance costs climb.

Why Inventory Is Rising

Several factors are converging to unlock supply in these markets:

  • New Construction: Builders have been most active in the Sun Belt states that saw the biggest population gains during 2020-2022. That supply is now hitting the market in volume.
  • Insurance Costs: Rising premiums—particularly in Florida and other coastal areas—are making homeownership more expensive and reducing demand.
  • Migration Slowdown: The pandemic-era exodus from high-cost cities has slowed dramatically, reducing buyer demand in previous hotspots.
  • Mortgage Rate Lock-In Weakening: While many homeowners remain reluctant to give up low-rate mortgages, life events (job changes, divorces, retirements) are gradually forcing more listings.

The Constrained Markets

Not every region is experiencing relief. Both active resale and new home inventory remain most limited across the Midwest and Northeast, where:

  • Limited New Construction: Zoning restrictions, labor shortages, and land constraints have prevented builders from addressing demand.
  • Strong Local Economies: Cities like Hartford, Rochester, and Worcester—Realtor.com's top housing markets for 2026—continue to attract buyers without corresponding supply increases.
  • Lock-In Effect Persists: Higher existing home prices mean larger mortgages to replace, making the rate lock-in more painful.

What the Data Shows

National housing inventory growth slowed to just under 10% year-over-year as 2026 began, with mortgage rates hovering near 6%. But the headline number obscures significant regional variation:

  • Price Cuts Rising: Nationally, 34.7% of listings have experienced price reductions—the highest level since the pandemic began—indicating seller expectations are adjusting to new realities.
  • New Listings Subdued: Despite inventory gains, new listing activity remains below pre-pandemic norms, suggesting the improvement is coming from slower absorption rather than a flood of new supply.
  • Months of Supply: November 2025 showed 4.2 months of inventory nationally, up from historic lows but still below the 5-6 months considered a balanced market.

Implications for Buyers and Sellers

If You're Buying in a High-Inventory State:

  • Negotiating power has shifted in your favor
  • Price reductions are common—don't pay asking price without research
  • Take time to find the right home; urgency is lower than in 2021-2022

If You're Selling in a High-Inventory State:

  • Price competitively from day one; overpriced homes are sitting longer
  • Expect to negotiate on inspections and closing costs
  • Consider timing—spring markets typically perform better

If You're in a Low-Inventory State:

  • Competition remains fierce; be prepared to move quickly
  • Price appreciation continues, though at a slower pace
  • New construction may be your best path to homeownership

The 2026 Outlook

The National Association of Realtors forecasts existing home sales will increase 14% in 2026, driven by expected mortgage rate declines to around 6% and improving affordability as wage growth outpaces home price appreciation.

However, analysts note that the "inventory shortage story is over"—supply won't be the primary driver of prices going forward. Instead, demand-side factors like employment, rates, and consumer confidence will determine market direction.

The Bottom Line

America's housing market is entering a new phase. The extreme seller's market of 2021-2023 is giving way to something more balanced—at least in the 17 states where inventory has normalized. For the rest of the country, the wait for housing relief continues, with different regions marching to very different drummers.