The housing market appears to be starting 2025 in much the same way as it started 2024, with elevated mortgage rates, low levels of transactions and rising inventory. The difference this year may be that house purchases and interstate migration pick up even with home-loan rates of 7%.

That’s in large part because of the divergent way in which 2024’s slow housing market has affected northern metros such as New York and Chicago versus southern metros including Tampa and Dallas. Northern homeowners’ property values have risen due to supply shortages, giving those keen to move south more “currency” to spend in popular migration destinations that are dealing with stagnant home values and rising inventory.

It’s something of a national tradition for large numbers of northerners to flock south every year. In pre-pandemic 2019, for instance, 181,000 Americans left New York, and 105,000 left Illinois, while Florida gained 134,000 residents and Texas welcomed 126,000. The numbers exploded during the housing boom in 2021 and 2022, until a lack of affordability stanched the flow, leaving crowded northern cities with fewer home sellers and, conversely, too much stock on the market in southern metros that saw a building boom during the pandemic.

These north-to-south migration patterns have implications beyond housing. Historically, they’ve brought talent, wealth and new ideas to southern states, fostering economic development and creating cultural ties between American metros.

Migration has also acted as a kind of release valve for Northerners fed up with the weather, congestion, or taxes and the cost of living. And in leaving they’ve helped free up housing for those who choose to remain, which is important for the part of the country that struggles the most to get residential construction going. Arguably some of the frustration that Northerners of both political parties have felt over the past couple of years stems from this feeling of being stuck and unable to “vote with their feet” as they have in the past. That should start to ease.

Lance Lambert of ResiClub, a housing analytics site, showed earlier this month that active housing inventory rose by 35% in Florida and 22% in Texas in 2024, compared with increases of just 1% in New York and 8% in Illinois. This continues a pattern that we’ve seen since 2023 where housing inventory levels have been rising faster in southern states, where homebuilders are more active. As a result, Florida and Texas have more homes for sale than before the pandemic, in stark contrast to the situation in most northern states.

Inventory levels are reflected in prices. Home values in Dallas rose 0.9% in October from a year earlier, and 0.4% in Tampa, according to the S&P CoreLogic Case-Shiller indices. In comparison, they’re up 7.3% in New York City and 6.2% in Chicago — reversing the big pandemic-era outperformance of southern metros.

For northern homeowners who have been waiting for a decline in mortgage rates to pack up and move south, the relative boost in home equity should now be sufficient to offset the impact of high borrowing costs. If you’re selling in New York to buy in Tampa, you can think of this dynamic as making a Tampa home about 6% cheaper. For a $400,000 home purchase with 20% down, a 6% decline in the purchase price has roughly the same effect on a monthly mortgage payment as the 30-year mortgage rate falling by 0.8 percentage point, Zillow’s mortgage calculator shows. The migration math should become even more compelling for would-be movers by later this spring with these trends in inventory levels and home prices likely to persist for some time.

Even with elevated mortgage rates, we’ve had signs in recent months of a thaw in transactions of existing homes for sale. Pending home sales in both the Northeast and the South have risen on a year-over-year basis for each of the last three months after three straight years of declines.

In some ways, this is not a surprise given how much inventory has built up in the South and how depressed resale activity has been overall since mortgage rates took off in 2022. Those with reason to move are no longer waiting for the Federal Reserve to cut interest rates or for election results. Sure, mortgage rates and affordability will still hold some people back, but there are no obvious catalysts on the horizon that could significantly shift the housing market or mortgage rates.

For retirees, the decision should be easier than for working-age families. The baby boomer generation has bigger home equity balances — perhaps even a paid-off home — making mortgage rates less of a factor than home values; the state of the labor market is a non-factor. That’s not true for young families. Today’s “low hiring, low firing” environment will certainly be a constraint for New York homeowners hoping to land a role in Dallas before putting their apartment on the market and taking the plunge.

While obstacles to migration no doubt remain, they’re less burdensome than they were a year ago, and should ease further as the year progresses. And a slow pick up in resale transactions and migration should help restore some balance between northern and southern housing markets.

_____

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Conor Sen is a Bloomberg Opinion columnist. He is founder of Peachtree Creek Investments.

_____

©2025 Bloomberg L.P. Visit bloomberg.com/opinion. Distributed by Tribune Content Agency, LLC.