A hallmark of a quality investment process is the ability to incorporate various inputs—qualitative, quantitative, heuristic and alternative viewpoints—into decision-making. SS&C ALPS Advisors regularly analyzes the macro economy before delving into individual asset classes. This macroeconomic insight was a key driver of our positive outlook on equities over the past year, driven by a re-accelerating economy, excess labor demand forcing wage increases and falling inflation.
However, these views have recently shifted. The economy is no longer accelerating, labor supply and demand are more balanced and out-sized disinflation appears to be behind us. This is where a quality investment process leverages other inputs to determine how to position multi-asset portfolios, with the aim of providing the highest probability of achieving individual investment goals.
Housing Inventory
We gain insights into consumer perspectives on wages, employment, aggregate wealth (including the stock market) and consumer sentiment surveys. A primary input for understanding consumer sentiment is housing—the consumer’s view of housing is crucial as it often represents their most valuable asset and influences their overall optimism.
The trend in housing inventory growth has recently caught our attention. Housing inventory is skyrocketing, especially in previously hot housing markets like Florida (+71.4%), Texas (+42%), California (+41.7%), Georgia (+52.5%), Tennessee (+38.6%), Arizona (+53.8%) and Colorado (+44.8%).1
The table below lists the top 10 markets for inventory growth by major metro areas, including the percentage of current listings with a price cut. Why is this important? Because historically, inventory growth precedes price changes, and we believe home price changes significantly impact consumer sentiment.
| |
Sale Inventory Growth (YoY) |
Home Value Growth (YoY) |
Overvalued %
|
Value / Income Ratio
|
Price Cut % |
| Tampa-FL |
93.00% |
3.30% |
32.30% |
5.26 |
37.90% |
| Orlando-FL |
81.50% |
3.70% |
28.60% |
5.29 |
29.60% |
| North-Port-FL |
80.20% |
-0.80% |
21.60% |
5.74 |
31.80% |
| Denver-CO |
77.80% |
2.30% |
19.60% |
5.73 |
41.50% |
| San-Diego-CA |
72.40% |
11.50% |
21.90% |
9.23 |
23.50% |
| Cape-Coral-FL |
69.80% |
-1.10% |
23.40% |
5.3 |
27.60% |
| Jacksonville-FL |
69.50% |
1.40% |
20.20% |
4.44 |
36.50% |
| Knoxville-TN |
68.60% |
9.50% |
37.60% |
4.88 |
28.60% |
| Miami-FL |
67.60% |
7.10% |
34.20% |
6.6 |
21.90% |
| Lakeland-FL |
67.00% |
1.80% |
35.40% |
4.84 |
29.80% |
Source: Re:Venture, as of 06/30/2024
More on the Relationship between Inventory and Price
Sorting the same data set by the percentage of current listings with a price cut clarifies the picture; major metro markets with high inventory growth are seeing listing price cuts. We’ve highlighted in bold the metro markets that appear on both lists—top 10 in inventory growth and top 20 in the percentage of current listings with a price cut.
| |
Sale Inventory Growth (YoY) |
Price Cut % |
| Colorado-Springs-CO |
53.80% |
45.30% |
| Denver-CO |
77.80% |
41.50% |
| Austin-TX |
31.70% |
39.00% |
| Tampa-FL |
93.00% |
37.90% |
| Dallas-TX |
52.30% |
37.60% |
| Jacksonville-FL |
69.50% |
36.50% |
| Phoenix-AZ |
56.30% |
36.40% |
| Salt-Lake-City-UT |
26.00% |
35.30% |
| Nashville-TN |
20.00% |
35.20% |
| San-Antonio-TX |
48.60% |
33.80% |
| Indianapolis-IN |
28.70% |
32.00% |
| North-Port-FL |
80.20% |
31.80% |
| Columbus-OH |
32.30% |
31.20% |
| Lakeland-FL |
67.00% |
29.80% |
| Atlanta-GA |
58.50% |
29.80% |
| Charleston-SC |
49.60% |
29.80% |
| Memphis-TN |
53.20% |
29.70% |
| Orlando-FL |
81.50% |
29.60% |
| Oklahoma-City-OK |
38.60% |
29.40% |
| Tulsa-OK |
31.50% |
29.00% |
Source: Re:Venture, as of 06/30/2024
What’s Different This Time?
It would be too simplistic to conclude that we are heading towards another housing market crash similar to 2007-2009. We do not believe this analogy holds, given several factors: increased pent-up demand from buyers reaching peak ownership age, healthier leverage in the mortgage industry, very low unemployment and balanced housing markets in states like New York, Pennsylvania, Ohio, Illinois and Michigan. The data does not support a national housing crisis similar to the last downturn. However, we do see evidence of a consumer sentiment shift in markets impacted by rising inventories, which may eventually lead to home price declines and a following impact on consumers in those markets.
The Consumer Sentiment Mosaic
As Bob Dylan eloquently said, "the times they are a-changin’." Coupled with a slowing economy, a more balanced labor market and stable yet-high consumer goods prices, we believe home price declines in certain major metro markets will contribute to consumer reluctance to spend and take risks. Our team will monitor the housing market closely over the coming year, focusing on how these trends impact consumer behavior.
Important Disclosures & Definitions
1 Re:Venture, as of 06/30/2024
AAI000724 07/16/2025
