Housing market outlook: Texas and Florida are now buyers’ markets. Here’s why it could be time to move to the South

The housing markets in Florida and Texas were particularly hot—both figuratively and literally—during the pandemic. Buyers flocked to these markets to get more bang for their buck, while also enjoying tax breaks and the sunny weather that comes with both locations. But this attention brought with it more competition, and buyers started to struggle with higher home prices and mortgage rates. 

But now Texas and Florida are back at the top of the best housing markets for buyers, according to a Zillow report released Wednesday. These two states dominate the best places for buyers in Zillow’s new market heat index, which takes into account the share of homes that have an accepted offer from a buyer within 21 days or fewer, the share of homes that have a price cut, and engagement with active listings on the website and app. 

“Would-be buyers who witnessed intense competition in sunny Texas and Florida markets earlier on in the pandemic aren’t seeing such a frenzy now,” according to Zillow. Texas and Florida secured seven of the top 10 best buyers’ markets in the U.S. while most of the country’s 50 largest cities are still in favor of sellers, the Zillow report shows.

“An influx of inventory is the main driver in a buyers’ market. This increase in supply gives buyers options, and thus the power to negotiate and drive down prices,” Erin Sykes, chief economist with Nest Seekers International, tells Fortune. In Florida and Texas in particular, there’s been less competition and more supply driven by “new condo assessments that have priced out some owners, sustained high insurance prices, and the increased property tax basis created by higher-priced transactions,” she says.

So for prospective homeowners who can afford to buy a home in today’s market, the South may be the best place to move—if you don’t mind higher insurance prices and the heat. Here’s why it could be time to become a permanent snow bird.

You can get a deal 

Higher inventory levels have been key to helping buyers find homes more easily in Florida and Texas, experts agree. 

“More inventory, less competition, and less urgency to borrow have their advantages, as there are far fewer bidders on properties,” Greg Forest, a senior global real estate adviser at Sotheby’s International Realty, tells Fortune. “It is clear that the right cities in Florida and Texas have become destinations for many people looking to move and travel south.”

Housing supply—particularly on the west coast of Florida—is surging, and sellers are cutting asking prices, according to a Redfin report released in late April.  

“Now is the time to get a deal in the south,” Sykes says. “Our transaction volume has picked up, but most properties are going into contract 10% to 20% below asking price.”

Plus, the more time a home spends on the market, the more likely it is to experience a price cut.

“Homes in the less-populated areas between [Florida] metros are sitting on the market for weeks, leading sellers to lower prices,” Sasha Dookhoo, a Florida homeowner who purchased her house in 2021 “before the housing frenzy began,” tells Fortune

To be sure, there are still cities in both Texas and Florida where home prices are neutral or continue to rise—and they’re still higher than they were pre-pandemic. 

“Both Florida and Texas are attractive for buyers given the lower cost of living and favorable tax environments—however, prices are still staggeringly high compared to a few years ago,” Dookhoo says. “There are tradeoffs to moving to Florida because we need to prepare for hurricanes, and Texas, because of the intense heat waves.”

More construction

Another reason Texas and Florida are currently considered buyers’ markets is an increase in new construction. “Strong construction in many of these markets has helped restore inventory levels,” according to Zillow. 

“In Florida, I can’t drive anywhere without seeing a new community popping up,” says Dookhoo, who lives in Gainesville, which is about two hours north of Orlando. “I travel to Orlando often and the number of homes popping up along the way in the most remote areas has been surprising to me.”

Especially in Miami and West Palm Beach, the “number of new construction condo units coming on the market… is staggering,” Sykes says. However, many of these units are priced at more than $2 million, she says. 

“I don’t know where we expect to find all these buyers,” Sykes says. “We need to focus on building more work-force housing, not luxury.”

Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up for free.